LONDON &
ASSOCIATED
PROPERTIES
ANNUAL REPORT 2017
Contents
OVERVIEW
1
LAP at a glance
2 Chairman and Chief Executive’s statement
STRATEGIC REPORT
4
Financial and performance review
7
Principal activities, strategy & business model
7 Risks and uncertainties
8 Bisichi risks and uncertainties
9 Key performance indicators
10 Corporate responsibility
GOVERNANCE
12 Directors & advisors
13 Directors’ report
17 Corporate Governance
19
Governance Statement by the
Chairman of The Remuneration Committee
20 Annual remuneration report
24 Remuneration policy
26 Audit committee report
27 Directors’ responsibilities statement
28
Independent auditor’s report
FINANCIAL STATEMENTS
Consolidated income statement
32
32
33
34
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in
shareholders’ equity
35
Consolidated cash flow statement
36 Group accounting policies
42
69
Notes to the financial statements
Five year financial summary
Financial calendar
Annual General Meeting
19 June 2018
Announcement of half year results to 30 June 2018
Late August 2018
Payment of final and special dividend for 2017 (if approved)
14 September 2018
Announcement of annual results for 2018
Late April 2019
OVERVIEW
OVERVIEW
LAP at a glance
London & Associated Properties PLC (“LAP”) is a main market listed group
which invests in UK shopping centres and retail property whilst also managing
property assets for institutional clients. LAP owns and/or manages £186
million of property investments. As a property company we look to create
environments where tenants can thrive.
The Group also holds a substantial investment in Bisichi Mining PLC, which
operates coal mines in South Africa and owns UK property investments. In
accordance with IFRS 10 the results of Bisichi have been consolidated in the
group accounts.
FINANCIAL HIGHLIGHTS
Fully diluted net
assets per share
53.74p
2016: 44.83p
IFRS net assets
£56.7m
2016: £48.6m
Properties portfolio
valuation*
£186m
2016: £221m
*Including properties under management
OVERALL PORTFOLIO SPLIT
PORTFOLIO BY RENTAL INCOME
42%
42%
58%
58%
KEY PROJECTS
HIGHLIGHT
Wholly owned
• Market Row and Brixton Village Brixton
Market Row and Brixton Village sold in April 2018
Investments
and management
• Orchard Square, Sheffield
• Kings Square, West Bromwich
• Kingsgate Centre, Dunfermline
• The Rushes Centre, Loughborough
• The Vancouver Quarter Centre
Kings Lynn
Co-investment with Oaktree Capital Management
and manage three of their shopping centres
Coal production
• In South Africa, Black Wattle produced 1.30 million metric tonnes of Run of Mine Coal in 2017 (2016:
1.26 million metric tonnes)
London & Associated Properties PLC 2017 1
OVERVIEW
Chairman and Chief Executive’s statement
We are pleased to report on a very satisfactory
period for the 12 months to 31st December 2017.
The most significant event in 2017 was our decision to offer for sale
the two markets in Brixton, valued at £24.5 million last year and
yielding around £0.5 million annually, net of interest expense. We
believed that the timing was right to realise this asset and generate a
significant profit. Sale proceeds of £37.25 million were received in
April 2018. Allowing for costs and repayment of related loans, this
will leave the Company with cash from this disposal of £20.5 million.
We are already in discussions with third parties on potential new
investments and will look for opportunities to reinvest the cash and
expand the portfolio over the coming months.
The year was also marked by a successful conclusion to a long
running dispute with The Market Village Company Limited (the
tenant of the two Brixton Markets). The lease entitles LAP to a share
of total income less specified expenses. The Court supported our
claim that inappropriate expenses had been deducted in calculating
the income due. As a result, rental income for 2017 includes £0.6
million for back rent which is now due from the tenant.
LAP Group (excluding Bisichi and Dragon) property revenue for the
year to 31st December 2017 was £6.8 million as compared with
£6.1 million in the previous year. Excluding the extra Brixton and
other income, our property revenue would have been £6.1 million,
which is a creditable result in the very challenging current trading
environment.
Within the LAP Group we have been particularly focused on
operating costs during 2017 and we are pleased to report that in
2017 these were approximately 8% lower at £3.8 million compared to
£4.1 million the year before.
CONSOLIDATED RESULTS
The Group (including Bisichi and Dragon) net assets at the year end
were £56.71 million (2016: £48.63 million).
Total net assets of LAP Group (including our net interest in Bisichi)
have increased by almost 20% to £45.85 million (2016: £38.24
million), while net asset value per share has increased by 20% to
53.74p from 44.83p in 2016. Total property assets owned by LAP,
Bisichi and other companies in which LAP has a financial interest
amount to £186 million (2016: £221 million).
The Group profit after valuation movements and before taxation for
the year was £11.28 million (loss 2016: £0.97 million). Besides the
improvements in Bisichi (as detailed in the Bisichi section below) and
LAP income and costs (as stated above), the main improvement was
due to the increase in valuation of investment properties by £9.37
million (2016: £0.53 million). A full breakdown of group income and
result by sector is included in the financial review and in the
segmental analysis in Note 1 to the financial statements.
DEBT MANAGEMENT
In June 2017 we repaid £0.75 million of Prudential debenture stock
which carried a coupon of 11.6% per annum. In August 2018, the
residual £3 million of this debenture will expire. We are currently
talking to a number of lenders about refinancing the portfolio against
which the debenture is secured, and we are pleased to report that
interest is strong. We will update shareholders on the terms of any
new loan once we have selected the lender. We are confident that
we will make a significant saving on the £0.3 million per annum
interest we are currently paying.
LAP PROPERTY ACTIVITIES
Orchard Square, Sheffield
The shops at Orchard Square have remained effectively fully let
throughout 2017, and we therefore have no significant new lettings
to report. However, we have a number of lease expiries in 2018 and
have commenced negotiations with tenants to renew their leases.
Responses to date have been positive.
Kings Square, West Bromwich
Kings Square, our shopping centre at West Bromwich, has had a
strong year during which we have achieved several good lettings.
The principal mall remains fully let and recent lettings have
underscored rental growth compared to a year ago. Additionally, the
side mall, which has always been the weakest of the malls within the
Centre, is fully let following a period of intensive marketing.
The town seems to be finding its equilibrium after the opening of a
new Tesco Extra and adjacent shopping centre and Kings Square is
clearly the location of choice for discount retailers. This is helped by
the tram and bus terminus being attached to the rear of our centre.
We therefore believe that this Centre will continue to trade
successfully.
414 Coldharbour Lane, Brixton
Shareholders are aware that, following lease expiry in 2015, we are
in the process of trying to obtain vacant possession of this property
from the current tenant. We believe that the tenant has lost the
statutory rights of renewal. In December 2017, the Court found in
favour of LAP on two counts. A third and final count requires a
separate hearing which is scheduled for September 2018. We are
confident of our position and we will update shareholders in due
course.
OTHER
The rest of our property portfolio continues to trade well and the
LAP Group portfolio has a void level of 1.47%, (2016: 2.15%).
2 London & Associated Properties PLC 2017
OVERVIEW Chairman and Chief Executive’s statement
PROPERTIES OUTLOOK
There has been a lot of press coverage recently about retailer
insolvencies and the increasing migration to online shopping. So far
we have not directly suffered any increased level of retailer insolvency
but we cannot be isolated entirely from general high street trends.
Like all retail landlords, we will be forced to compete against an
increased supply of empty shops.
As highlighted in Chairman’s Statements over the last few years, we
believe that our portfolio is relatively protected from online shopping
as our core property holdings are all either part of a major city that
will remain a destination in its own right; a differentiated offer which
forms part of a leisure experience; or they fulfil a role providing
convenience retail facilities. We still believe that these sections of the
retail world will continue to be relevant for the foreseeable future.
HARROGATE JOINT VENTURE
Our Harrogate joint venture with Oaktree Capital Management,
which owns three shopping centres in Dunfermline, Kings Lynn and
Loughborough, underwent a refinancing during the year. A loan at
80% of valuation was secured from Goldman Sachs with mezzanine
funding provided by DRC. During this refinancing, we declined the
option to put further cash into the joint venture and consequently
our share of the equity was diluted from 6.95% to 3.17%. However,
our asset and property management contracts remain unchanged
and we continue to receive fees for managing the centres.
MINING AND PROPERTY ACTIVITIES BY BISICHI
MINING PLC
The management of Bisichi report that for the year ended 31st
December 2017, the company achieved earnings before interest, tax,
depreciation and amortisation (EBITDA) of £3.7 million (2016: £2.4
million). This significant improvement was achieved despite the
impact on Black Wattle, its direct coal mining subsidiary in South
Africa, of mining challenges in the first half of the year.
For the first half of 2017 production at Black Wattle was impacted
by higher than expected seasonal rains as well as ongoing stone
contamination issues at its opencast areas. Overall, during this
period, the mine achieved production of 582,000 metric tonnes
(2016 H1: 795,000 metric tonnes). The stone contamination issues
affected both yield and mining production through the washing
plant, thus impacting on sales volumes and earnings in the first half
of the year.
During the second half of the year, further development of Black
Wattle’s opencast areas and the successful completion of
infrastructure improvements to its washing plant allowed the mine to
increase production to 714,000 metric tonnes (2016 H2: 465,000
tonnes). In addition, the completion of these infrastructure
improvements assisted in reducing the stone contamination through
the washing plant and increasing its overall yield.
As a result of the higher production in the second half of the year,
overall mining production from Black Wattle increased in 2017, with
total production for the year of 1.30 million metric tonnes (2016:
1.26 million metric tonnes). As part of Black Wattle’s mining plan, the
opencast areas that were mined in 2017 will continue to be mined
throughout 2018. Bisichi expect mining production levels achieved
in the second half of 2017 to be maintained in 2018.
Looking forward to 2018, Bisichi management will focus on
maintaining production at the higher levels achieved in the second
half of 2017 and increasing the life of the mine through the
acquisition of additional reserves. With strong demand and improved
prices achievable for the company’s coal, Bisichi believes the group is
in a strong position to achieve significant value from its South African
mining operations in 2018.
Bisichi’s property portfolio is managed by LAP and continues to
perform well. Overall, net property revenue (excluding joint ventures)
was £1.12 million (2016: £1.06 million).
The property portfolio was externally valued at 31st December 2017
and the value of UK investment properties attributable to the group
at year end remained unchanged at £13.25 million.
Bisichi has decided to recommend a final dividend of 3p (2016: 3p)
and in light of the strong results achieved, a special dividend of 1p
(2016: nil). The total Bisichi dividend for the year is 5p (2016: 4p).
LAP’s cash share of this is £221,000 (2016: £177,000).
DRAGON RETAIL PROPERTIES
Dragon has a single retail asset in Bristol. There is a lease renewal on
the ground floor. The tenant has requested a new lease, and we
believe the rent to be reversionary. Negotiations are underway.
LAP DIVIDEND
We are pleased to recommend a final dividend of 0.175p, an
increase of over 6% on the 2016 dividend of 0.165p. We are also
pleased to report that we will recommend a special dividend of
0.125p following the sale of our Brixton properties. This means we
will pay a total dividend of 0.30p.
Finally, we would like to thank all of our directors,
staff and advisors for their hard work during the
year. We look forward to the year ahead with
cautious optimism.
Sir Michael Heller,
Chairman
John Heller,
Chief Executive
27 April 2018
London & Associated Properties PLC 2017 3
STRATEGIC
REPORT
STRATEGIC
REPORT
Financial and performance review
CASH FLOW
The operating cash flow and net cash balances at the year-end were
as follows:
CASH FLOW FROM OPERATIONS
LAP
Bisichi
Dragon
Group total
2017
£'000
2,708
7,593
(14)
10,287
Note: The figures exclude inter-company transactions.
NET CASH BALANCES
LAP
Bisichi
Dragon
Group total
2017
£'000
2,109
4,065
92
6,266
2016
£'000
2,623
2,879
84
5,586
2016
£'000
3,706
(890)
115
2,931
Our investment with Oaktree Capital Management (HRGT Shopping
Centres LP), remains profitable and generates management fees (2017:
£0.46 million and 2016: £0.46 million) for our wholly owned subsidiary
(London & Associated Management Services Limited). We also received
£0.1 million (2016: £0.1 million) as a partial repayment of our loan.
INCOME STATEMENT
The segmental analysis in Note 1 to the financial statements gives more
detail but the tables below give a clearer summary of the Group results.
RESULTS BEFORE REVALUATIONS
AND NON-CASH MOVEMENTS
LAP
Bisichi
Dragon
Group total
2017
£'000
(130)
3,536
(29)
3,377
2016
£'000
(1,070)
(241)
9
(1,302)
Note: The figures exclude inter-company transactions.
Rental income in LAP includes a one off receipt of £0.6 million for
Brixton back rent. Additionally, renewed efforts to cut costs at LAP
are reflected in lower overheads and property expenses, resulting in
an improvement of £0.9 million in the operating result before
revaluations of the core property business.
Bisichi’s improvement of £3.8 million is explained under Bisichi
Mining PLC, in this review.
The Group property portfolio, including assets held for sale (including
Bisichi) of £114.46 million increased on revaluation by £9.37 million, a 9%
increase.
The financial statements for 2017 have been
prepared to reflect the requirements of IFRS
10. This means that the accounts of Bisichi
Mining PLC (a London Stock Exchange main
market quoted company – BISI) (“Bisichi”),
have been consolidated with those of LAP.
Bisichi continues to operate as a fully independent company and
currently LAP owns only 41.52% of the issued ordinary share capital.
However, because related parties also have shareholdings in Bisichi
and there is a wide disposition of other shareholdings, LAP is
deemed under IFRS 10 to have effective control of Bisichi for
accounting purposes. This treatment means that the income and net
assets of Bisichi are disclosed in full and the value attributable to the
“non-controlling interest” (58.48%) is shown separately in the equity
section as a non-controlling interest. There is no impact on the net
assets attributable to LAP shareholders.
Dragon Retail Property Limited (“Dragon”), our 50:50 joint venture
with Bisichi is also consolidated.
Shareholders are aware that LAP is a property business with a
significant investment in a listed mining company. The effect of
consolidating the results, assets and liabilities of the property business
and the mining company make the figures complex and less
transparent. Property company accounts are already subject to
significant volatility as valuations of property assets as well as
derivative liabilities can be subject to major movements based on
market sentiment. Most of these changes, though, have little or no
effect on the cash position and it is, of course, self-evident that cash
flow is the most important factor influencing the success of a property
business. We explain the factors affecting the property business first,
clearly separating these from factors affecting the mining business
which we do not manage. Comments about Bisichi (the mining
business) are based on information provided by the independent
management of that company.
LOANS
Long term debt of LAP (excluding Bisichi and Dragon which are
detailed separately below), consists of a £45 million facility expiring
in July 2019 and two debentures: one of £10 million expiring in
August 2022 and another of £3 million expiring in August 2018.
During the year £0.75 million of debenture was repaid. As in
previous years, all loans and debentures are secured on core
property and cash deposits and are covenant compliant.
LAP’s five year £35 million non-recourse loan from Santander, as
senior lender, is supported by a £10 million loan from Europa Capital
Mezzanine Limited, as mezzanine lender. The senior loan facility is
fully hedged and at the year end, 50% of the loan was swapped at a
rate of 2.25% and the remaining 50% was covered by an interest cap
at 2.25%. This gives a blended current interest rate of 4.73% for the
total £45 million debt. On completion of the sale of Brixton Markets,
£15.9 million of senior and mezzanine loans are repayable.
4 London & Associated Properties PLC 2017
STRATEGIC REPORT Financial and performance review
The improved property revenues, reductions in running costs and
increased property valuations, have resulted in the LAP Group property
business showing an increase of £10.76 million in the profit before
taxation to £9.61 million (2016: loss £1.15 million).
PROFIT/(LOSS) BEFORE TAXATION
LAP
Bisichi
Dragon
Group profit/(loss) before taxation
2017
£'000
9,614
1,696
(32)
11,278
2016
£'000
(1,150)
216
(40)
(974)
Note: The figures exclude inter-company transactions.
TAXATION
The LAP Group taxation charge of £2.98 million (2016: £1.17 million)
is mainly due to changes in the rules governing the utilisation of tax
losses which has restricted the group's ability to offset the deferred
tax liability arising on the revaluation gains recognised in the year.
BALANCE SHEET
Taking account of the changes required by IFRS 10 (see table below) LAP has group net assets of £56.7 million (2016: £48.6 million).
Net assets attributable to equity shareholders at the year-end were 53.74p per share (2016: 44.83p per share).
2017
Investment properties
Other fixed assets
Investments in Bisichi Mining PLC
Investments in joint ventures
Other non current assets
Held for sale assets
Current assets
Current liabilities
Non-current liabilities
Net assets
2016
Investment properties
Other fixed assets
Investments in Bisichi Mining PLC
Investments and loans in joint ventures
and assets held for sale
Other non current assets
Current assets
Current liabilities
Non-current liabilities
Net assets
LAP
ORIGINAL
GROUP
£'000
65,231
116
7,120
874
1,748
36,441
4,824
(10,822)
(59,377)
46,155
93,791
112
6,918
866
3,008
5,559
(9,014)
(62,697)
38,543
BISICHI
MINING PLC
GROUP
£'000
13,397
8,613
-
874
51
-
13,622
(9,025)
(9,858)
17,674
13,426
8,520
–
2,671
32
12,224
(10,326)
(9,541)
17,006
DRAGON
RETAIL
PROPERTIES
£'000
2,630
6
-
-
-
-
2,528
(2,124)
(1,291)
1,749
CONSOLIDATION
ADJUSTMENTS
£'000
-
-
(7,120)
(1,748)
-
-
(4,416)
4,416
-
(8,868)
2,630
21
–
–
–
2,447
(2,078)
(1,288)
1,732
–
–
(6,918)
(1,732)
–
(4,347)
4,347
–
(8,650)
LAP
NET ASSETS
£'000
81,258
8,735
-
-
1,799
36,441
16,558
(17,555)
(70,526)
56,710
109,847
8,653
–
1,805
3,040
15,883
(17,071)
(73,526)
48,631
London & Associated Properties PLC 2017 5
STRATEGIC REPORT Financial and performance review
BISICHI MINING PLC
Although the results of Bisichi Mining PLC have been consolidated in
these financial statements, the Board of LAP has no direct influence
over the management of Bisichi. The comments below are based on
the published accounts of Bisichi.
The Bisichi group results are stated in full in its published 2017 financial
statements which are available on its website: www.bisichi.co.uk.
The Bisichi group increased its EBITDA to £3.7 million (2016: £2.4
million) mainly due to increased operating profits before depreciation
from the mining activities of £4.6 million (2016: £1.2 million) offset
by the group’s share of losses in its joint venture of £1.8 million
(2016: £nil). The share of losses in joint ventures arises from writing off
the investment in Ezimbokodweni Mining (Pty) Ltd of £1.8 million, as
detailed in Notes 12 and 13 to the accounts. Depreciation in the
year relating to mining activities remained unchanged at £1.8 million.
Profit for the year after tax was £1.5 million (2016: £0.3 million).
Bisichi has two core revenue streams – investment in retail property
in the UK and coal mining in South Africa.
The increase in operating profit was mainly attributable to the higher
prices achieved by coal and increased mining production at Black
Wattle offsetting the impact of the higher mining and washing costs.
The UK retail property portfolio was valued at the year end at
£13.25 million (2016: £13.25 million). The property portfolio is
actively managed by LAP and generated rental income of £1.1
million in the year (2016: £1.1 million).
In South Africa, a subsidiary of Bisichi signed an increase in the
structured trade finance facility from R80 million to R100 million
(South African Rand) in July 2017 with Absa Bank Limited. This facility
is renewable annually at 30th June and is secured against inventory,
debtors and cash that are held in the Bisichi group’s South African
operations. This facility is expected to be renewed again in 2018.
In the UK, the Bisichi group signed a £6 million five-year term loan
with Santander in December 2014. This loan is secured against UK
investment property. No covenants were breached during the year.
Overall the Bisichi group achieved a net increase in cash and cash
equivalents of £4.9 million (2016: £0.4 million). This increase was mainly
attributable to improved coal mining operations which generated a
substantial (£7.3 million) increase in cash from operating activities.
Bisichi group’s net balance of cash and cash equivalents (including
bank overdrafts) at the year end was £4.1 million (owing 2016: £0.9
million). The Bisichi group’s cash and cash equivalents (excluding
bank overdrafts), at the year-end was £5.3 million (2016: £2.4
million).
The Bisichi group’s financial position remains strong. Its net assets at
31st December 2017 were £17.7 million (2016: £17 million). The group
expects to continue achieving significant value in 2018 from its existing
mining operation. In addition, Bisichi seeks to expand its operations
in South Africa through the acquisition of additional coal reserves.
DRAGON RETAIL PROPERTIES LIMITED
Dragon is a UK property investment company. The company has a
Santander bank loan of £1.25 million secured against its investment
property and is covenant compliant. It paid management fees of
£84,000 (2016: £72,000) split equally to the two joint venture
partners. Its results continue to be near breakeven after taxation.
Dragon has net assets of £1.7 million (2016: £1.7 million).
ACCOUNTING JUDGEMENTS AND GOING CONCERN
The most significant judgements made in preparing these accounts relate
to the carrying value of the properties, investments and interest rate
hedges. The hedges have been valued by the hedge provider. The Group
uses external property valuers to determine the fair value of its properties.
Under IFRS10 the Group has included Bisichi Mining PLC in the
consolidated accounts, as it is deemed to be under the effective
control of LAP and has therefore been treated as a subsidiary.
The Directors exercise their commercial judgement when reviewing
the Group’s cash flow forecasts and the underlying assumptions on
which the forecasts are based. The Group’s business activities,
together with the factors likely to affect its future development, are
set out in the Chairman and Chief Executive’s Statement and in this
review. In addition, the Directors consider that Note 23 to the
financial statements sets out the Group’s objectives, policies and
processes for managing its capital; its financial risk management
objectives; details of its financial instruments and hedging activities;
and its exposure to credit risk, liquidity risk and other risks.
With a quality property portfolio comprising a majority of tenants with
long leases supported by suitable financial arrangements, the Directors
believe the group is well placed to manage its business risks successfully,
despite the continuing uncertain economic climate. The Directors
therefore have a reasonable expectation that the group and the company
have adequate resources to continue in operational existence for the
foreseeable future. Thus, they continue to adopt the going concern basis
of accounting in preparing the annual financial statements.
TAXATION
The LAP Group tax strategy is to account for tax on an accurate and
timely basis. We only structure our affairs based on sound commercial
principles and wish to maintain a low tax risk position. We do not
engage in aggressive tax planning.
The LAP Group (excluding Bisichi and Dragon) has unused tax losses and
deductions with a potential value of £10.167 million of which only
£4.74 million has been recognised in the 2017 financial statements.
As LAP returns to profit, these tax losses and deductions should be utilised.
DIVIDENDS AND FUTURE PROSPECTS
The directors are proposing a final dividend of 0.175p per ordinary
share payable in September 2018.
The directors are also proposing a special dividend of 0.125p per
ordinary share payable in September 2018.
The Group remains cautiously confident about its trading and future
outlook and it continues to look at further reducing its overhead
costs and interest payable, while it stabilises its property income
together with seeking out growth opportunities.
6 London & Associated Properties PLC 2017
STRATEGIC REPORT
STRATEGIC REPORT
Principal activities, strategy & business model
The LAP Group’s principal business model is the investment in and management of town centre retail property through direct investment and
joint ventures, where we manage the property ourselves and on behalf of our partners.
The principal activity of Bisichi Mining PLC is coal mining in South Africa. Further information is available in its 2017 Financial Statements
which are available on their web site: www.bisichi.co.uk
STRATEGIC PRIORITIES ARE
OUR STRATEGY IS
MAXIMISING INCOME
By achieving an appropriate tenant mix and shopping experience we can increase footfall
through the centres, hence increase tenant demand for space and enhance income.
CREATING QUALITY PROPERTY
CAPITAL STRENGTH
MAINTAIN THE VALUE OF
INVESTMENT IN BISICHI
We look to improve the consumer experience at all our centres by achieving an appropriate
tenant mix and a vibrant trading environment through investment activity, enhancement,
refurbishment and development.
We operate within a prudent and flexible financial structure. Our gearing, which has been
substantially reduced, provides financial stability whilst giving capacity and flexibility to look for
further investments.
By encouraging the Bisichi management to maximise sustainable profits and cash distributions.
Risks and uncertainties
DESCRIPTION OF RISK
ASSET MANAGEMENT:
TENANT FAILURE
Financial loss.
DESCRIPTION OF IMPACT
MITIGATION
LEASES NOT RENEWED
Financial loss.
Initial and subsequent assessment of tenant
covenant strength combined with an active credit
control function.
Lease expiries regularly reviewed. Experienced
in house teams with strong tenant and market
knowledge who manage appropriate tenant mix.
ASSET LIQUIDITY (SIZE AND
GEOGRAPHICAL LOCATION)
Assets may be illiquid and affect
flexing of balance sheet.
Regular reporting of current and projected position
to the Board with efficient treasury management.
PEOPLE:
RETENTION AND RECRUITMENT
OF STAFF
Unable to retain and attract the
best people for the key roles.
REPUTATION:
BUSINESS INTERRUPTION
Loss in revenue.
Impact on footfall.
Adverse publicity.
Potential for criminal/
civil proceedings.
FINANCING:
FLUCTUATION IN PROPERTY
VALUES
Impact on covenants and other loan
agreement obligations.
REDUCED AVAILABILITY OF
BORROWING FACILITIES
Insufficient funds to meet existing debts/
interest payments and operational
payments.
LOSS OF CASH AND DEPOSITS
Financial loss.
FLUCTUATION OF INTEREST RATES
Uncertainty of interest rate costs.
Nomination Committee and senior staff review
skills gaps and succession planning. Training and
development offered.
Documented Recovery Plan in place.
General and terrorism insurance policies in place
and risks monitored by trained security staff.
Health and Safety policies in place.
CCTV in centres.
Secure income flows.
Regular monitoring of LTV and IC covenants and
other obligations.
Focus on quality assets.
Efficient treasury management.
Loan facilities extended where possible.
Regular reporting of current and projected position
to the Board.
Only use a spread of banks and financial institutions
which have a strong credit rating.
Manage derivative contracts to achieve a balance
between hedging interest rate exposure and
minimising potential cash calls.
London & Associated Properties PLC 2017 7
STRATEGIC REPORT
STRATEGIC REPORT
Bisichi risks and uncertainties
Bisichi (although it is consolidated into group accounts as required by IFRS 10) is managed independently of LAP. The risks outlined below are
an abbreviated summary of the risks reported by the Directors of Bisichi to the shareholders of that Company. Full details are available in the
published accounts of Bisichi (www.bisichi.co.uk).
These risks, although critical to Bisichi, are of less significance to LAP which only has a minority investment of 41.52% in the company. In the
unlikely event that Bisichi was unable to continue trading, it would not affect the ability of LAP to continue operating as a going concern.
DESCRIPTION OF RISK
DESCRIPTION OF IMPACT
MITIGATION
COAL PRICES CAN BE IMPACTED MATERIALLY
BY MARKET AND CURRENCY VARIATIONS
Affects sales value and therefore
margins.
Forward sales contracts are used to
manage value expectations.
MINING OPERATIONS ARE INHERENTLY RISKY.
MINERAL RESERVES, REGULATIONS, LICENSING,
POWER AVAILABILITY, HEALTH AND SAFETY
CAN ALL DAMAGE OPERATIONS
CURRENCY RISK
CASHFLOW VARIATION BECAUSE OF MINING
RISKS, COMMODITY PRICE OR CURRENCY
VARIATIONS
Loss of production causing loss of
revenue.
Use of geology experts, careful
attention to regulations, health and
safety training, employee dialogue to
minimise controllable risks.
Affects realised sales value and
therefore margins.
Regular monitoring and review of
forward currency situation.
Variations can deliver significant shifts
in cash flow.
UK property investments used to offset
high risk mining operations.
8 London & Associated Properties PLC 2017
STRATEGIC REPORT
STRATEGIC REPORT
Key performance indicators
The Group’s Key Performance Indicators are selected to ensure clear alignment between its strategy and shareholder interests.
The KPIs are calculated using data from management reporting systems.
STRATEGIC PRIORITY
MAXIMISING INCOME – LIKE FOR LIKE PROPERTY INCOME
KPI
PERFORMANCE
To increase the like-for-like
income from the property
year on year.
Like-for-like rental income as
a percentage of the prior year
rental.
The like-for-like rental
income has remained unchanged.
LIKE-FOR-LIKE INCOME
In the continuing difficult trading
environment, this is considered
satisfactory.
MAXIMISING INCOME – OCCUPANCY
We aim to maximise the total
income in our properties by
achieving full occupancy.
The ERV of the empty units
as a percentage of our total
income.
Void levels have remained unchanged
at 2.06%.
CAPITAL STRENGTH – GROWTH IN NET ASSET VALUE PER SHARE
Movement in the net assets
per share.
The net assets per share
is the principal measure
used by the group for
monitoring its performance
and is an indicator of the
level of reserves available
for distribution by way of
dividend.
The net assets per share
increased by 8.91 pence per share
or nearly 20% to 53.74p.
The strategic realisation of Brixton
markets is the main reason for the
significant increase this year. This is in
accordance with our policy of selling
assets when we believe that they
have achieved maximum value.
4.0
2.0
0.0
-4.0
-8.0
6.0
4.0
2.0
0.0
75.0
50.0
25.0
0.0
2015
2016
2017
VOIDS
2015
2016
2017
NET ASSETS PER SHARE
2015
2016
2017
London & Associated Properties PLC 2017 9
STRATEGIC REPORT
STRATEGIC REPORT
Corporate responsibility
SUSTAINABLE DEVELOPMENT
Bisichi’s Black Wattle continues to strive to conduct business in a
safe, environmentally and socially responsible manner. Some highlights
of their Health, Safety and Environment performance in 2017:
• Black Wattle Colliery recorded one Lost Time Injury during 2017
(2016: One).
• No cases of Occupational Diseases were recorded.
• Zero claims for the Compensation for Occupational Diseases were
submitted.
They continue to be compliant and make progress in terms of their
Social and Labour Plan and their various BEE initiatives. A fuller
explanation of these can be found in Bisichi’s 2017 Financial Statements
which are available on their web site: www.bisichi.co.uk
footprint boundary are: properties that we manage on behalf of
others or are not wholly owned by LAP and emissions are considered
non material by the business.
Emissions for landlord controlled areas have been calculated based
on actual consumption information collected from each shopping
centre. Emissions from tenant controlled areas have been calculated
based on floor area and energy consumption benchmarks for general
retail services in the UK.
The Bisichi Group has employed the Operational Control boundary
definition to outline the carbon footprint boundary. Included within
that boundary are Scope 1 & 2 emissions from coal extraction and
onsite mining processes for Black Wattle Colliery. Excluded from the
footprint boundary are emission sources considered non material by
Bisichi Group, including refrigerant use onsite.
GREENHOUSE GAS REPORTING
We have reported on all of the emission sources required under the
Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations
2013 for the reporting period 1st January 2017 to 31st December
2017. The emissions are detailed in tables 1, 2, 3 and 4 below.
We have used the ISO14046-1 Standard (2006) and guidance
provided by UK’s Department of Environment and Rural Affairs
(DEFRA) on voluntary and mandatory carbon reporting. Emission
factors were used from UK Government’s GHG Conversion Factors
for Company Reporting 20171.
We have employed the Financial Control definition to outline our
carbon footprint boundary reporting Scope 1 & 2 emissions only.
Emissions from both landlord and tenant controlled areas of LAP
owned shopping centres and facilities that fall within the footprint
boundary. LAP has landlord controlled areas in Kings Square, Orchard
Square, Brewery Street, Shipley and Bridgend. Excluded from our
As well as reporting Scope 1 and Scope 2 emissions, legislation
requires that at least one intensity ratio is reported for the given
reporting period. The intensity figure represented below shows the
emissions in tCO2e per thousand pounds revenue.
Table 1. landlord & tenant controlled areas
Scope 1 emissions
Scope 2 emissions
EMISSIONS SOURCE
Natural gas (tCO2e)
Refrigerants (tCO2e)
Electricity (tCO2e)
Total tCO2e
Intensity ratio (tCO2e/£thousand)
Table 2. LAP controlled areas
Scope 1 emissions
Scope 2 emissions
EMISSIONS SOURCE
Natural gas (tCO2e)
Refrigerants (tCO2e)
Electricity (tCO2e)
Total tCO2e
Table 3. Tenant controlled areas
Scope 1 emissions
Scope 2 emissions
EMISSIONS SOURCE
Natural gas (tCO2e)
Refrigerants (tCO2e)
Electricity (tCO2e)
Total tCO2e
1. 2017 Guidelines to DEFRA/DECC’s GHG Conversion Factors for Company Reporting, Department for environment,
Food and Rural Affairs (DEFRA) and Department for Energy and Climate Change (DECC)
10 London & Associated Properties PLC 2017
2017
71
0
2,938
3,009
0.467
2017
71
0
176
247
2017
-
-
2,762
2,762
2016
234
5
3,491
3,730
0.076
2016
234
5
236
475
2016
-
-
3,255
3,255
STRATEGIC REPORT Corporate responsibility
Table 4. Coal mining carbon footprint
Emissions source:
Scope 1 Combustion of fuel & operation of facilities
Scope 1 Emissions from coal mining activities
Scope 2 Electricity, heat, steam and cooling purchased for own use
Total
Intensity:
Intensity 1 Tonnes of CO2 per pound sterling of revenue
Intensity 2 Tonnes of CO2 per pound of coal produced
2017
CO2E
TONNES
15,575
22,683
11,210
49,468
0.0013
0.038
2016
CO2E
TONNES
11,860
22,171
8,530
42,561
0.0019
0.034
ENVIRONMENT
United Kingdom
The Group’s principal UK activity is property investment, which
involves renting premises to retail businesses. We seek to provide
those tenants with good quality premises from which they can
operate in an efficient and environmentally friendly manner. Where
possible, improvements, repairs and replacements are made in an
environmentally efficient manner and waste re-cycling arrangements
are in place at all of the Company’s locations.
South Africa
The Bisichi group’s principal activity in South Africa is coal mining.
Under the terms of the mine’s Environmental Management Programme
approved by the Department of Mineral Resource (“DMR”), Black
Wattle undertakes a host of environmental protection activities to
ensure that the approved Environmental Management Plan is fully
implemented. A performance assessment audit was conducted to
verify compliance to their Environmental Management Programme
and no significant deviations were found.
EMPLOYEE, SOCIAL, COMMUNITY AND
HUMAN RIGHTS
The Group’s policy is to attract staff and motivate employees by offering
competitive terms of employment. The Group provides equal
opportunities to all employees and prospective employees including
those who are disabled and operates in compliance with all relevant
national legislation.
DIVERSITY AND EQUALITY
The board recognises the importance of diversity, both in its membership,
and in the Group's employees. It has a clear policy to promote diversity
across the business. The Board considers that the quotas are not
appropriate in determining its composition and has therefore chosen
not to set targets. All aspects of diversity, including but not limited to
gender, are considered at every level of recruitment. Gender diversity
of the Board and the Group is set out below.
DIRECTORS, EMPLOYEES AND GENDER
REPRESENTATION
At the year end the LAP Group (excluding Bisichi and Dragon), had
6 directors (6 male, 0 female), 2 senior managers (2 male, 0 female)
and 23 employees (12 male, 11 female).
BISICHI MINING PLC
Bisichi Mining PLC’s group at the year end had 6 directors (6 male,
0 female), 7 senior managers (6 male, 1 female) and 196 employees
(143 male, 53 female).
Detailed information relating to Bisichi Strategic Report is available
in its 2017 financial statements.
Approved on behalf of the board of directors
Anil Thapar,
Finance Director
27 April 2018
London & Associated Properties PLC 2017 11
GOVERNANCE
GOVERNANCE
Directors & advisors
SECRETARY & REGISTERED OFFICE
Anil K Thapar FCCA
24 Bruton Place
London W1J 6NE
AUDITOR
RSM UK Audit LLP
PRINCIPAL BANKERS
Santander UK plc
Abbey National Treasury Services plc
Europa Capital Mezzanine Ltd
SOLICITORS
Olswang LLP
Pinsent Masons LLP
STOCKBROKER
Stockdale Securities Limited
REGISTRARS & TRANSFER OFFICE
Link Asset Services
Shareholder Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
UK telephone: 0871 664 0300
International telephone: +44 371 664 0300
(Calls cost 12p per minute plus your phone company’s access charge.
Calls outside the United Kingdom will be charged at the applicable
international rate).
Lines are open between 9.00am to 5.30pm, Monday to Friday,
excluding public holidays in England and Wales.
Website: www.linkassetservices.com
Email: enquiries@linkgroup.co.uk
Company registration number
341829 (England and Wales)
WEBSITE
www.lap.co.uk
E-MAIL
admin@lap.co.uk
EXECUTIVE DIRECTORS
Sir Michael Heller MA FCA*
(Chairman)
John A Heller LLB MBA
(Chief Executive)
Anil K Thapar FCCA
(Finance Director)
NON-EXECUTIVE DIRECTORS
Howard D Goldring BSC (ECON) ACA†
Howard Goldring is Executive Chairman of Delmore Asset
Management Limited which specialises in the discretionary
management of investment portfolios for pension funds, charities,
family trusts and private clients. He also acts as an advisor providing
high level asset allocation advice to family offices and pension
schemes, including Tesco Pension Investment Ltd. He has been a
member of the LAP Board since July 1992, and has almost 40 years’
experience of the real estate market. He was a director of
Baronsmead VCT 2 PLC from 2010-2016, and has specialised in
providing many companies with investor relations support.
Clive A Parritt FCA CF FIIA #†
Clive Parritt joined the board on 1 January 2006. He is a chartered
accountant with over 40 years’ experience of providing strategic,
financial and commercial advice to businesses of all sizes. He is
Chairman of BG Training Limited and a director of Jupiter US Smaller
Companies plc. Until April 2016 he was Group Finance Director of
Audiotonix Limited (an international manufacturer of audio mixing
consoles). He has chaired and been a director of a number of other
public and private companies. Clive Parritt was President of the
Institute of Chartered Accountants in England and Wales in
2011-12. He is Chairman of the Audit Committee and as Senior
Independent Director he chairs the Nomination and Remuneration
Committees.
Robin Priest MA
Robin Priest joined the board on 31 July 2013. He is chairman of
private real estate company Property Alliance Group and a senior
advisor to Alvarez & Marsal LLP (“A&M”) and to a major listed
German real estate investment fund manager. He has more than 36
years’ experience in real estate and structured finance. He was
formerly Managing Director of A&M’s real estate practice, advising
private sector and public sector clients on both operational and
financial real estate matters. Prior to joining A&M, Robin was lead
partner for Real Estate Corporate Finance in London with Deloitte
LLP and before this he founded and ran a property company backed
by private equity. He is also a trustee of London’s Oval House
Theatre.
* Member of the nomination committee
† Member of the audit, remuneration and nomination committees
# Senior independent director
12 London & Associated Properties PLC 2017
GOVERNANCE
Directors’ report
The Directors submit their report and the
audited financial statements for the year
ended 31 December 2017.
STRATEGIC REPORT
A comprehensive review and assessment of the Group’s activities during
the year as well as its position at the year end and prospects for the
forthcoming year are included in the Chairman and Chief Executive’s
Statement and the Strategic Report. These reports can be found on
pages 2 to 11 and should be read in conjunction with this report.
ACTIVITIES
The principal activities of the Group during the year were property
investment and development, as well as investment in joint ventures
and an associated company. The associated company is Bisichi Mining
PLC (Bisichi) in which the Company holds a 41.52 per cent interest.
Bisichi is listed on the main market of the London Stock Exchange
and operates in England and South Africa with subsidiaries which are
involved in overseas mining and mining investment. The results,
together with the assets and liabilities, of Bisichi are consolidated
with those of LAP in accordance with the terms of IFRS 10 even
though the Group only has a minority interest – under IFRS 10 the
58% majority interest is disclosed as a “non-controlling interest”.
BUSINESS REVIEW AND POST BALANCE SHEET EVENTS
Review of the Group’s development and performance
A review of the Group’s development and performance can be found
below and should be read in conjunction with the Strategic Report
on pages 4 to 11.
Details of any post balance sheet events are disclosed in Note 32 to
the financial statements.
FUTURE DEVELOPMENTS
The Group continues to look for new opportunities to acquire real
estate assets where it feels it can increase value by applying its intensive
management skills. At the same time, it seeks to reduce its interest
payments on its loans as they expire or where opportunities arise to
refinance on better terms. We also seek to improve our existing estate
through the continued pursuit of asset management initiatives.
PROPERTY ACTIVITIES
The Group is a long-term investor in property. It acquires retail properties,
actively manages those assets to improve rental income, and thus seeks
to enhance the value of its properties over time. In reviewing performance,
the principal areas regularly monitored by the Group include:
• Rental income – the aim of the Group is to maximise the
maintainable income from each property by careful tenant
management supported by sympathetic and revenue enhancing
development. Income may be affected adversely by the inability of
tenants to pay their rent, but careful monitoring of rent collection
and tenant quality helps to mitigate this risk. Risk is also minimised
by a diversified tenant base, which should limit the impact of the
failure of any individual tenant.
• Cash flow – allowing for voids, acquisitions, development expenditure,
disposals and the impact of operating costs and interest charges,
the Group aims to maintain a positive cash flow over time.
• Financing costs – the exposure of the Group to interest rate
movements is managed partly by the use of swap and cap
arrangements (see Note 23 on page 56 for full details of the
contracts in place) and also by using loans with fixed terms and
interest rates. These arrangements are designed to ensure that our
interest costs are known in advance and are always covered by
anticipated rental income. Details of key estimates that have been
adopted are contained in the accounting policies Note on page 37.
• Property valuations – market sentiment and economic conditions
have a direct effect on property valuations, which can vary
significantly (upwards or downwards) over time. Bearing in mind
the long term nature of the Group’s business, valuation changes
have little direct effect on the ongoing activities or the income and
expenditure of the Group. Tenants generally have long term leases,
so rents are unaffected by short term valuation changes.
Borrowings are secured against property values and if those values
fall very significantly, this could limit the ability of the Group to
develop the business using external borrowings. The risk is
minimised by trying to ensure that there is adequate cover to allow
for fluctuations in value on a short term basis.
It continues to be the policy of the Group to realise property assets
when the valuation of those assets reaches a level at which the directors
consider that the long-term rental yield has been reached. The Group
also seeks to acquire additional property investments on an opportunistic
basis when the potential rental yields offer scope for future growth.
INVESTMENT ACTIVITIES
The investments in joint ventures and Bisichi are for the long term.
LAP manages the UK property assets of Bisichi. However, the principal
activity of Bisichi is overseas mining investment (in South Africa).
While IFRS 10 requires the consolidation of Bisichi, the investment is held
to generate income and capital growth over the longer term. It is
managed independently of LAP and should be viewed by shareholders as
an investment and not a subsidiary. The other listed investments are
held as current assets to provide the liquidity needed to support the
property activities while generating income and capital growth.
Investments in property are made through joint ventures when the
financing alternatives and spreading of risk make such an approach
desirable.
DIVIDEND
The directors are recommending payment of a final dividend for
2017 of 0.175p per share (2016 0.165p per share) and a special
dividend for 2017 of 0.125p (2016: nil).
Subject to shareholder approval, the ordinary final dividend and special
dividend will be payable on Friday 14 September 2018 to shareholders
registered at the close of business on Friday 17 August 2018.
London & Associated Properties PLC 2017 13
GOVERNANCE Directors & advisors
THE COMPANY’S ORDINARY SHARES HELD IN TREASURY
At 31 December 2017, 221,061 (2016: 221,061) ordinary shares
were held in Treasury with a market value of £54,160 (2016:
£46,422). At the Annual General Meeting (AGM) in June 2017
members renewed the authority for the Company to purchase up to
10 per cent of its issued ordinary shares. The Company will be asking
members to renew this authority at the next AGM to be held on
Tuesday 19 June 2018.
Treasury shares held at 1 January 2017
and 31 December 2017
221,061
Treasury shares are not included in issued share capital for the
purposes of calculating earnings per share or net assets per share
and they do not qualify for dividends payable.
INVESTMENT PROPERTIES
The freehold and long leasehold properties of the Company, its
subsidiaries and Bisichi were revalued as at 31 December 2017 by
independent professional firms of chartered surveyors – Allsop LLP,
London (80.69 per cent of the portfolio), Carter Towler, Leeds (16.98
per cent) – and by the Directors (2.34 per cent). The valuations,
which are reflected in the financial statements, amount to £78
million (2016: £105.08 million).
Investment property of £36.4 million sold in 2018 is stated under
current assets, as Assets held for sale.
Taking account of prevailing market conditions, the valuation of the
properties at 31 December 2017 resulted in an increase of £9.37 million
(2016: increase of £0.53 million). The proportion of this revaluation
attributable to the Group (net of taxation) is reflected in the
consolidated income statement and the consolidated balance sheet.
FINANCIAL INSTRUMENTS
Note 23 to the financial statements sets out the risks in respect of
financial instruments. The board reviews and agrees overall treasury
policies, delegating appropriate authority for applying these policies
to the Chief Executive and Finance Director. Financial instruments
are used to manage the financial risks facing the Group and
speculative transactions are prohibited. Treasury operations are
reported at each board meeting and are subject to weekly internal
reporting. Hedging arrangements are in place for the Company, its
subsidiaries and joint ventures in order to limit the effect of higher
interest rates upon the Group. Where appropriate, hedging
arrangements are covered in the Chairman and Chief Executive’s
Statement and the Financial Review.
DIRECTORS
Sir Michael Heller, J A Heller, A K Thapar, H D Goldring, C A Parritt
and R Priest were Directors of the company for the whole of 2017.
C A Parritt, J A Heller and A K Thapar are retiring by rotation at the
Annual General Meeting in 2018 and offer themselves for re-election.
Clive Parritt has been a Director since January 2006 and has a
contract of service determinable upon three months’ notice and is
the Senior Independent Director and Chairman of the audit,
nomination and remuneration committees. He is a Chartered
Accountant with over 40 years’ experience in providing strategic,
financial and commercial advice to business. His financial knowledge
and broad commercial experience are of significant benefit to the
business. The board has considered the re-appointment of Clive
Parritt and recommends his re-election as a Director.
John Heller has been a Director since 1998 and was appointed Chief
Executive in September 2001. He has a contract of employment
determinable upon twelve months’ notice. The board has considered
the re-appointment of John Heller and recommends his re-election
as a Director.
Anil Thapar has been Finance Director since January 2015 and is
also the Company Secretary. He has a contract of employment
determinable upon three months’ notice. Anil Thapar is a Chartered
Certified Accountant and has worked at LAP since November 2005.
The board has considered the re-appointment of Anil Thapar and
recommends his re-election as a Director.
DIRECTORS’ INTERESTS
The interests of the Directors in the ordinary shares of the Company,
including family and trustee holdings, where appropriate, can be
found on page 22 of the Annual Remuneration Report.
SUBSTANTIAL SHAREHOLDINGS
At 31 December 2017, Sir Michael Heller and his family had an
interest in 48.08 million shares of the Company, representing 56.35
per cent of the issued share capital net of treasury shares (2016:
48.08 million shares representing 56.35 per cent). Cavendish Asset
Management Limited had an interest in 7,909,464 shares
representing 9.27 per cent of the issued share capital of the
Company (2016: 8,173,875 shares representing 9.58 per cent).
James Hyslop had an interest in 4,846,258 shares representing
5.68 per cent of the issued share capital of the Company (2016:
4,456,258 shares representing 5.22 per cent).
The Company does not consider that the Heller family have a
controlling share interest irrespective of the number of shares held
as no individual party holds a majority and there is no legal obligation
for shareholders to act in concert. The Directors do not consider that
any single party has control.
The Company is not aware of any other holdings exceeding 3 per
cent of the issued share capital.
14 London & Associated Properties PLC 2017
GOVERNANCE Directors & advisors
SHARE CAPITAL AND TAKEOVER DIRECTIVE
The Company has one class of share capital, namely ordinary shares.
Each ordinary share carries one vote. All the ordinary shares rank pari
passu. There are no securities issued by the Company which carry
special rights with regard to control of the Company.
The identity of all significant direct or indirect holders of securities in
the Company and the size and nature of their holdings is shown in
“Substantial Shareholdings” above.
The rights of the ordinary shares to which the HMRC approved Share
Incentive Plan relates are exercisable by the trustees on behalf of the
employees.
There are no restrictions on voting rights or on the transfer of ordinary
shares in the Company, save in respect of treasury shares. The rules
governing the appointment and replacement of Directors, alteration of
the articles of association of the Company and the powers of the
Company’s Directors accord with usual English company law provisions.
Each Director is re-elected at least every three years. The Company has
requested authority from shareholders to buy back its own ordinary
shares and there will be a resolution to renew the authority at this
year’s AGM (Resolution 12).
The Company is not party to any significant agreements that take
effect, alter or terminate upon a change of control of the Company
following a takeover bid. The Company is not aware of any
agreements between holders of its ordinary shares that may result in
restrictions on the transfer of its ordinary shares or on voting rights.
There are no agreements between the Company and its Directors or
employees providing for compensation for loss of office or
employment that occurs because of a takeover bid.
STATEMENT AS TO DISCLOSURE OF INFORMATION
TO THE AUDITOR
The Directors in office at the date of approval of the financial
statements have confirmed that, so far as they are aware, there is no
relevant audit information of which the auditor is unaware. Each of
the Directors has confirmed that they have taken all the steps that
they ought to have taken as a Director in order to make them aware
of any relevant audit information and to establish that it has been
communicated to the auditor.
INDEMNITIES AND INSURANCE
The Articles of Association of the company provide for it to
indemnify, to the extent permitted by law, directors and officers
(excluding the Auditor) of the company, including officers of
subsidiaries and associated companies, against liabilities arising from
the conduct of the Group’s business. The indemnities are qualifying
third party indemnity provisions of the Companies Act 2006 and
each of these qualifying third party indemnities was in force during
the course of the financial year ended 31 December 2017 and as at
the date of this Directors’ report. No amount has been paid under
any of these indemnities during the year.
The Group maintains Directors and officers insurance, which is
reviewed annually and is considered to be adequate by the Company
and its insurance advisers.
DONATIONS
No political donations were made during the year (2016: £Nil).
£1,000 of donations for charitable purposes were made during the
year (2016: £2,000).
CORPORATE RESPONSIBILITY
Environment
The environmental considerations of the group’s South African coal
mining operations are covered in the Bisichi Mining PLC Strategic Report.
The group’s UK activities are principally property investment whereby
premises are provided for rent to retail businesses. The group seeks
to provide those tenants with good quality premises from which they
can operate in an efficient and environmentally efficient manner and
waste re-cycling arrangements are in place at all the company’s locations.
Greenhouse gas emissions
Details of the group’s greenhouse gas emissions for the year ended
31 December 2017 can be found on pages 10 and 11 of the
Strategic Report.
Employment
The group’s policy is to attract staff and motivate employees by offering
competitive terms of employment. The group provides equal opportunities
to all employees and prospective employees including those who are
disabled. The Bisichi Mining PLC Strategic Report gives details of the
group’s activities and policies concerning the employment, training,
health and safety and community support and social development
concerning the group’s employees in South Africa.
GOING CONCERN
The directors have reviewed the cash flow forecasts of the Group
and the underlying assumptions on which they are based. The
Group’s business activities, together with the factors likely to affect
its future development, are set out in the Chairman’s and Chief
Executive’s Statement and Financial Review. In addition, Note 23 to
the financial statements sets out the Group’s objectives, policies and
processes for managing its capital; its financial risk management
objectives; details of its financial instruments and hedging activities;
and its exposure to credit risk and liquidity risk.
With secured long term banking facilities, sound financial resources
and long term leases in place the Directors believe it remains
appropriate to adopt the going concern basis of accounting in
preparing the annual financial statements.
The Bisichi directors continue to adopt the going concern basis of
accounting in preparing the Bisichi annual financial statements.
CORPORATE GOVERNANCE
The Corporate governance report can be found on pages 17 and 18
of the annual report and accounts.
ANNUAL GENERAL MEETING
The Annual General Meeting will be held at the Royal Automobile
Club, 89 Pall Mall, London, SW1Y 5HS on Tuesday 19 June 2018 at
10.00 a.m. Items 1 to 10 and 14 will be proposed as ordinary
resolutions. More than 50 per cent. of shareholders’ votes cast at the
meeting must be in favour for those ordinary resolutions to be passed.
Items 11 to 13 will be proposed as special resolutions. At least 75 per
cent. of shareholders’ votes cast at the meeting must be in favour for
those special resolutions to be passed. The Directors consider that all
of the resolutions (other than 14), to be put to the meeting are in the
best interests of the Company and its shareholders as a whole and
accordingly the board unanimously recommends that shareholders
vote in favour of all of the resolutions, other than 14, as the Directors
intend to do in respect of their own beneficial holdings of ordinary
shares. The Directors do not consider resolution 14 to be in the best
interests of the Company and its shareholders as a whole. The
Directors recommend that shareholders vote against this resolution.
Please note that the following paragraphs are only summaries of
certain of the resolutions to be proposed at the Annual General
Meeting and do not represent the full text of the resolutions. You
should therefore read this section in conjunction with the full text of
the resolutions contained in the notice of Annual General Meeting
which accompanies this Directors’ Report.
London & Associated Properties PLC 2017 15
GOVERNANCE Directors & advisors
ORDINARY RESOLUTIONS
Resolution 10 – Authority to allot securities
Paragraph 10.1.1 of Resolution 10 would give the Directors the
authority to allot shares in the Company and grant rights to
subscribe for or convert any security into shares in the Company up
to an aggregate nominal value of £2,836,478. This represents
approximately 1/3 (one third) of the ordinary share capital of the
Company in issue (excluding treasury shares) as at 26 April 2018
(being the last practicable date prior to the publication of this
Directors’ Report).
In line with guidance issued by the Investment Association (‘IA’),
paragraph 10.1.2 of Resolution 10 would give the directors the
authority to allot shares in the Company and grant rights to
subscribe for or convert any security into shares in the Company up
to a further aggregate nominal value of £2,836,478, in connection
with an offer by way of a rights issue. This amount represents
approximately 1/3 (one third) of the ordinary share capital of the
Company in issue (excluding treasury shares) as at 26 April 2018
(being the last practicable date prior to the publication of this
Directors’ Report).
The Directors’ authority will expire on the earlier of 31 August 2019
or the next AGM. The Directors do not currently intend to make use
of this authority. However, if they do exercise the authority, the
Directors intend to follow best practice as recommended by the IA
regarding its use (including as regards the Directors standing for
re-election in certain cases).
SPECIAL RESOLUTIONS
The following special resolutions will be proposed at the
Annual General Meeting:
Resolution 11 – Disapplication of pre-emption rights
Under English company law, when new shares are allotted or
treasury shares are sold for cash (otherwise than pursuant to an
employee share scheme) they must first be offered at the same price
to existing shareholders in proportion to their existing shareholdings.
This special resolution gives the Directors authority, for the period
ending on the date of the next annual general meeting to be held in
2019, to: (a) allot shares of the Company and sell treasury shares for
cash in connection with a rights issue or other pre-emptive offer; and
(b) otherwise allot shares of the Company, or sell treasury shares, for
cash up to an aggregate nominal value of £425,472 representing, in
accordance with institutional investor guidelines, approximately 5 per
cent. of the total ordinary share capital in issue as at 26 April 2018
(being the last practicable date prior to the publication of this
Directors’ Report) in each case as if the pre-emption rights in English
company law did not apply.
Save in respect of issues of shares in respect of employee share
schemes and share dividend alternatives, the Directors do not
currently intend to make use of these authorities. The board intends
to adhere to the provisions in the Pre-emption Group’s Statement of
Principles not to allot shares for cash on a non-pre-emptive basis in
excess of an amount equal to 7.5 per cent. of the Company’s
ordinary share capital within a rolling three-year period without prior
consultation with shareholders. The Directors’ authority will expire
on the earlier of 31 August 2019 or the date of next AGM.
16 London & Associated Properties PLC 2017
Resolution 12 – Purchase of own ordinary shares
The effect of Resolution 12 would be to renew the Directors’ current
authority to make limited market purchases of the Company’s
ordinary shares of 10 pence each. The power is limited to a
maximum aggregate number of 8,509,435 ordinary shares
(representing approximately 10 per cent. of the Company’s issued
share capital as at 26 April 2018 (being the latest practicable date
prior to publication of this Directors’ Report)). The minimum price
(exclusive of expenses) which the Company would be authorised to
pay for each ordinary share would be 10 pence (the nominal value of
each ordinary share). The maximum price (again exclusive of
expenses) which the Company would be authorised to pay for an
ordinary share is an amount equal to 105 per cent. of the average
market price for an ordinary share for the five business days
preceding any such purchase. The authority conferred by Resolution
12 will expire at the conclusion of the Company’s next annual
general meeting to be held in 2019 or 15 months from the passing
of the resolution, whichever is the earlier. Any purchases of ordinary
shares would be made by means of market purchases through the
London Stock Exchange.
If granted, the authority would only be exercised if, in the opinion of
the Directors, to do so would result in an increase in earnings per
share or asset values per share and would be in the best interests of
shareholders generally. In exercising the authority to purchase
ordinary shares, the Directors may treat the shares that have been
bought back as either cancelled or held as treasury shares (shares
held by the Company itself). No dividends may be paid on shares
which are held as treasury shares and no voting rights are attached
to them.
Resolution 13 – Notice of General Meetings
Resolution 13 shall be proposed to allow the Company to call
general meetings (other than an Annual General Meeting) on 14
clear days’ notice. A resolution in the same terms was passed at the
Annual General Meeting in 2017. The notice period required by the
Companies Act 2006 for general meetings of the Company is 21
days, unless shareholders approve a shorter notice period, which
cannot however be less than 14 clear days. Annual General Meetings
must always be held on at least 21 clear days’ notice. It is intended
that the flexibility offered by this resolution will only be used for
time-sensitive, non-routine business and where merited in the
interests of shareholders as a whole. The approval will be effective
until the Company’s next Annual General Meeting, when it is
intended that a similar resolution will be proposed.
OTHER MATTERS
RSM UK Audit LLP has expressed its willingness to continue in office
as auditor. A proposal will be made at the Annual General Meeting
for its reappointment.
By order of the board
Anil Thapar
Secretary
27 April 2018
24 Bruton Place
London
W1J 6NE
GOVERNANCE
Corporate Governance
The Company has adopted the Corporate
Governance Code for Small and Mid-Size
Quoted Companies (the QCA Code) published
by the Quoted Companies Alliance. The QCA
Code provides governance guidance to small
and mid-size quoted companies. The
paragraphs below set out how the Company
has applied this guidance during the year. The
Company has complied with the QCA Code
throughout the year.
PRINCIPLES OF CORPORATE GOVERNANCE
The board promotes good corporate governance in the areas of risk
management and accountability as a positive contribution to
business prosperity. The board endeavors to apply corporate
governance principles in a sensible and pragmatic fashion having
regard to the circumstances of the business. The key objective is to
enhance and protect shareholder value.
BOARD STRUCTURE
During the year the board comprised the Chairman, the Chief
Executive, one other executive Director and three non-executive
Directors. Their details appear on page 12 The board is responsible
to shareholders for the proper management of the Group.
The Directors’ responsibilities statement in respect of the accounts is
set out on page 27. The non-executive Directors have a particular
responsibility to ensure that the strategies proposed by the executive
Directors are fully considered. To enable the board to discharge its
duties, all Directors have full and timely access to all relevant
information and there is a procedure for all Directors, in furtherance
of their duties, to take independent professional advice, if necessary,
at the expense of the Group. The board has a formal schedule of
matters reserved to it and normally has eleven regular meetings
scheduled each year. Additional meetings are held for special
business when required.
The board is responsible for overall Group strategy, approval of major
capital expenditure and consideration of significant financial and
operational matters.
The board committees, which have written terms of reference, deal
with specific aspects of the Group’s affairs:
• The nomination committee is chaired by C A Parritt and comprises
one other non-executive Director and the executive Chairman.
The committee is responsible for proposing candidates for
appointment to the board, having regard to the balance and
structure of the board. In appropriate cases recruitment
consultants may be used to assist the process. All Directors are
subject to re-election at a maximum of every three years.
• The remuneration committee is responsible for making
recommendations to the board on the Company’s framework of
executive remuneration and its cost. The committee determines
the contract terms, remuneration and other benefits for each of
the executive directors, including performance related bonus
schemes, pension rights and compensation payments. The board
itself determines the remuneration of the non-executive Directors.
The committee comprises two non-executive Directors and it is
chaired by C A Parritt. The executive Chairman of the board is
normally invited to attend. The Annual Remuneration Report is
set out on pages 20 to 23.
• The audit committee comprises two non-executive Directors and
is chaired by C A Parritt. The audit committee report, with its terms
of reference, is set out on page 26 The Chief Executive and
Finance Director are normally invited to attend.
BOARD AND BOARD COMMITTEE MEETINGS HELD
IN 2017
The number of regular meetings during the year and attendance was
as follows:
Sir Michael Heller Board
Nomination committee
J A Heller
A K Thapar
C A Parritt
H D Goldring
R Priest
Remuneration
committee
Board
Audit committee
Board
Audit committee
Board
Audit committee
Nomination committee
Remuneration
committee
Board
Audit committee
Nomination committee
Remuneration
committee
Board
MEETINGS
HELD
10
MEETINGS
ATTENDED
10
1
1
10
2
10
2
10
2
1
1
10
2
1
1
10
1
1
10
2
9
2
10
2
1
1
10
2
1
1
7
PERFORMANCE EVALUATION – BOARD,
BOARD COMMITTEES AND DIRECTORS
The performance of the board as a whole, its committees and the
non-executive Directors is assessed by the Chairman and the Chief
Executive and is discussed with the senior independent non-
executive Director. Their recommendations are discussed at the
nomination committee prior to proposals for re-election being
recommended to the board. The performance of executive Directors
is discussed and assessed by the remuneration committee. The
senior independent Director meets regularly with the Chairman,
executive and non-executive Directors individually outside of formal
meetings. The Directors will take outside advice in reviewing
performance but have not found this to be necessary to date.
London & Associated Properties PLC 2017 17
GOVERNANCE Corporate Governance
INDEPENDENT DIRECTORS
The senior independent non-executive Director is C A Parritt. The
other independent non-executive Directors are H D Goldring and R
Priest. Delmore Holdings Limited (Delmore) is a Company in which H
D Goldring is the majority shareholder and the Executive Chairman.
Delmore provides consultancy services to the Company on a fee
paying basis. R Priest provides services to the Company on a fee
paying basis. C A Parritt also provides some advisory services as part
of his accounting practice.
The board encourages all three non-executive Directors to act
independently and does not consider that length of service of any
individual non-executive Director, nor any connection with the
above mentioned consultancy and advisory companies, has resulted
in the inability or failure to act independently. In the opinion of the
board the three non-executive Directors continue to fulfil their roles
as independent non-executive Directors.
The independent Directors exchange views regularly between board
meetings and meet when required to discuss corporate governance
and other issues concerning the Group.
INTERNAL CONTROL
The Directors are responsible for the Group’s system of internal
control and for reviewing its effectiveness at least annually, and for
the preparation and review of its financial statements. The board has
designed the Group’s system of internal control in order to provide
the Directors with reasonable assurance that assets are safeguarded,
that transactions are authorised and properly recorded and that
material errors and irregularities are either prevented or would be
detected within a timely period. However, no system of internal
control can eliminate the risk of failure to achieve business objectives
or provide absolute assurance against material misstatement or loss.
The key elements of the control system in operation are:
• The board meets regularly on full notice with a formal schedule of
matters reserved for its decision and has put in place an
organisational structure with clearly defined lines of responsibility
and with appropriate delegation of authority;
• There are established procedures for planning, approval and
monitoring of capital expenditure and information systems for
monitoring the Group’s financial performance against approved
budgets and forecasts;
18 London & Associated Properties PLC 2017
• The departmental heads are required annually to undertake a full
assessment process to identify and quantify the risks that face
their departments and functions, and assess the adequacy of the
prevention, monitoring and modification practices in place for
those risks. In addition, regular reports about significant risks and
associated control and monitoring procedures are made to the
executive Directors. The process adopted by the Group accords
with the guidance contained in the document “Internal Control
Guidance for Directors on the Combined Code” issued by the
Institute of Chartered Accountants in England and Wales. The
audit committee receives reports from external auditors and from
executive Directors of the Group. During the period the audit
committee has reviewed the effectiveness of the system of
internal control as described above. The board receives periodic
reports from all committees.
• There are established procedures for the presentation and review
of the financial statements and the Group has in place an
organisational structure with clearly defined lines of responsibility
and with appropriate delegation of authority.
There are no internal control issues to report in the annual report
and financial statements for the year ended 31 December 2017. Up
to the date of approval of this report and the financial statements,
the board has not been required to deal with any related material
internal control issues. The Directors confirm that the board has
reviewed the effectiveness of the system of internal control as
described during the period.
COMMUNICATION WITH SHAREHOLDERS
Prompt communication with shareholders is given high priority.
Extensive information about the Group and its activities is provided
in the Annual Report. In addition, a half-year report is produced for
each financial year and published on the Company’s website. The
Company’s website www.lap.co.uk is updated promptly with
announcements and Annual Reports upon publication. Copies from
previous years are also available on the website.
The Company’s share price is published daily in the Financial Times.
The share price history and market information can be found at
http://www.londonstockexchange.com/prices-and-markets/markets/
prices.htm. The company code is LAS.
There is a regular dialogue with the Company’s stockbrokers and
institutional investors. Enquiries from individuals on matters relating
to their shareholdings and the business of the Group are dealt with
promptly and informatively.
The Company’s website is under continuous development to enable
better communication with both existing and potential new
shareholders.
THE BRIBERY ACT 2010
The Company is committed to acting ethically, fairly and with
integrity in all its endeavours and compliance with the code is
monitored closely.
GOVERNANCE
Governance Statement by the Chairman
of The Remuneration Committee
The remuneration committee is pleased to present
its report for the year ended 31 December 2017.
The report is presented in two parts in accordance
with the regulations.
The first part is the Annual Remuneration Report which details
remuneration awarded to Directors and non-executive Directors
during the year. The shareholders will be asked to approve the
Annual Remuneration Report as an ordinary resolution (as in
previous years) at the AGM in June 2018.
The second part is the Remuneration Policy which details the
remuneration policy for Directors. This policy was subject to a
binding vote by shareholders at the AGM in 2017 and was approved
for a 3 year period commencing from then. The committee reviewed
the existing policy and deemed that no changes were necessary to
the current arrangements.
Both of the reports have been prepared in accordance with The
Large and Medium-sized Companies and Groups (Accounts and
Reports) (Amendment) Regulations 2013.
The Company’s auditor, RSM UK Audit LLP is required by law to
audit certain disclosures and where disclosures have been audited
that is indicated.
C A Parritt
Chairman, Remuneration Committee
27 April 2018
London & Associated Properties PLC 2017 19
GOVERNANCE
Annual remuneration report
THE FOLLOWING INFORMATION HAS BEEN AUDITED
Single total figure of remuneration for the year ended 31 December 2017
SALARY AND
FEES
£'000
BONUSES
£'000
BENEFITS
£'000
PENSIONS
£'000
TOTAL
BEFORE
SHARE
OPTIONS
£'000
SHARE
OPTIONS
£'000
TOTAL 2017
£'000
Executive Directors
Sir Michael Heller*
Sir Michael Heller - Bisichi
J A Heller
A K Thapar
Non-executive Directors
H D Goldring*+
C A Parritt*+
R Priest*
Total
7
75
333
157
572
17
38
35
90
662
-
-
100
30
130
-
-
-
-
130
49
-
37
9
95
7
-
-
7
102
-
-
17
10
27
-
-
-
-
27
Single total figure of remuneration for the year ended 31 December 2016
Executive Directors
Sir Michael Heller*
Sir Michael Heller - Bisichi
J A Heller
A K Thapar
Non-executive Directors
H D Goldring*+
C A Parritt*+
R Priest*
Total
* Note 28 “Related party transactions”
SALARY AND
FEES
£'000
BONUSES
£'000
BENEFITS
£'000
PENSIONS
£'000
7
75
333
152
567
32
38
51
121
688
-
-
166
35
201
-
-
-
-
201
43
-
40
11
94
5
-
-
5
99
-
-
30
15
45
-
-
-
-
45
+ Members of the remuneration committee for years ended 31 December 2016 and 31 December 2017
Benefits include the provision of car, health and other insurance and subscriptions.
56
75
487
206
824
24
38
35
97
921
TOTAL
BEFORE
SHARE
OPTIONS
£'000
50
75
569
213
907
37
38
51
126
1,033
n/a
n/a
n/a
n/a
-
n/a
n/a
n/a
-
-
56
75
487
206
824
24
38
35
97
921
SHARE
OPTIONS
£'000
TOTAL 2016
£'000
n/a
n/a
n/a
n/a
-
n/a
n/a
n/a
-
-
50
75
569
213
907
37
38
51
126
1,033
Sir Michael Heller is a director of Bisichi Mining PLC, (a subsidiary for
IFRS 10 purposes) and received a salary from that company of
£75,000 (2016: £75,000) for services.
Although Sir Michael Heller receives reduced remuneration in
respect of his services to LAP, the Company does supply office
premises, property management, general management, accounting
and administration services for a number of companies in which Sir
Michael Heller has an interest. The board estimates that the annual
value of these services, if supplied to a third party, would have been
£300,000 (2016: £300,000). Further details of these services are set
out in Note 28 to the financial statements “Related party
transactions”.
J A Heller is a director of Dragon Retail Properties Limited, (a
subsidiary for IFRS 10 purposes) and received benefits from that
company of £10,698 (2016: £11,336) for services. This is included in
the remuneration figures disclosed above.
The remuneration figures disclosed for H D Goldring include fees
paid to his company, Delmore Holdings Limited for consultancy
services provided to the Group. This is detailed in Note 28 to the
financial statements.
The remuneration figures for C A Parritt include fees paid to his
accountancy practice for consultancy services provided to the
Group. This is detailed in Note 28 to the financial statements.
R Priest provides consultancy services to the Group. This is detailed
in Note 28 to the financial statements.
20 London & Associated Properties PLC 2017
GOVERNANCE Annual remuneration report
Summary of directors’ terms
Executive Directors
Sir Michael Heller
John Heller
Anil Thapar
Non-executive Directors
H D Goldring
C A Parritt
R Priest
DATE OF CONTRACT
UNEXPIRED TERM
NOTICE PERIOD
1 January 1971
1 May 2003
1 January 2015
1 July 1992
1 January 2006
31 July 2013
Continuous
Continuous
Continuous
Continuous
Continuous
Continuous
6 months
12 months
3 months
3 months
3 months
3 months
TOTAL PENSION ENTITLEMENTS
Two directors had benefits under money purchase schemes. Under their contracts of employment, they were entitled to a regular employer
contribution (currently £17,000 and £10,000 a year). There are no final salary schemes in operation. No pension costs are incurred on behalf
of non-executive Directors.
SHARE INCENTIVE PLAN (SIP)
In 2006 the Directors set up an HMRC approved share incentive plan (SIP). The purpose of the plan, which is open to all eligible LAP
executive Directors and head office based staff, is to enable them to acquire shares in the Company and give them a continuing stake in the
Group. The SIP comprises four types of share – (1) free shares under which the Company may award shares of up to the value of £3,000
each year, (2) partnership shares, under which members may save up to £1,500 per annum to acquire shares, (3) matching shares, through
which the Company may award up to two shares for each share acquired as a partnership share, and (4) dividend shares, acquired from
dividends paid on shares within the SIP.
1. Free shares: No free shares were issued for 2017 bonuses or for 2016 bonuses.
2. Partnership shares: No partnership shares were issued between November 2016 and October 2017.
3. Matching shares: The partnership share agreements for the year to 31 October 2017 provide for two matching shares to be awarded free
of charge for each partnership share acquired. No partnership shares were acquired in 2017 (2016: nil). Matching shares will usually be
forfeited if a member leaves employment in the Group within five years of their grant.
4. Dividend shares: Dividends on shares acquired under the SIP will be utilised to acquire additional shares. Accumulated dividends received
on shares in the SIP to 31 December 2017 amounted to £Nil (2016: £602).
Dividend shares issued:
Directors:
J A Heller
A K Thapar
Staff
Total at 31 December
NUMBER OF MEMBERS
NUMBER OF SHARES
VALUE OF SHARES
2017
2016
2017
2016
-
-
-
-
1
1
6
8
-
-
-
-
402
495
1,934
2,831
2017
£
-
-
-
-
2016
£
85
105
412
602
The SIP is set up as an employee benefit trust. The trustee is London & Associated Securities Limited, a wholly owned subsidiary of LAP, and
all shares and dividends acquired under the SIP will be held by the trustee until transferred to members in accordance with the rules of the SIP.
SHARE OPTION SCHEMES
The Company has an HMRC approved scheme (Approved Scheme). It was set up in 1986 in accordance with HMRC rules to gain HMRC
approved status which gave the members certain tax advantages. There are no performance criteria for the exercise of options under the
Approved Scheme, as this was set up before such requirements were considered to be necessary. No Director has any options outstanding
under the Approved Scheme nor were any options granted under the Approved Scheme for the year ended 31 December 2017.
A share option scheme known as the “Non-approved Executive Share Option Scheme” (Unapproved Scheme) which does not have HMRC
approval was set up during 2000. At 31 December 2017 there were no options to subscribe for ordinary shares outstanding. The exercise of
options under the Unapproved Scheme is subject to the satisfaction of objective performance conditions specified by the remuneration
committee which conforms to institutional shareholder guidelines and best practice provisions. Further details of this scheme are set out in
Note 26 “Share Capital” to the financial statements.
London & Associated Properties PLC 2017 21
GOVERNANCE Annual remuneration report
PAYMENTS TO PAST DIRECTORS
No payments were made to past Directors in the year ended 31 December 2017.
PAYMENTS FOR LOSS OF OFFICE
No payments for loss of office were made in the year ended 31 December 2017.
STATEMENT OF DIRECTORS’ SHAREHOLDING AND SHARE INTEREST
Directors’ interests
The interests of the Directors in the ordinary shares of the Company, including family and trustee holdings, where appropriate, were as follows:
Sir Michael Heller
H D Goldring
J A Heller
C A Parritt
R Priest
A K Thapar
BENEFICIAL
INTERESTS
NON-BENEFICIAL
INTERESTS
31 DEC 17
5,753,541
19,819
1,867,393
36,168
-
120,495
1 JAN 17
6,053,541
19,819
1,867,393
36,168
-
120,495
31 DEC 17
19,277,931
-
†14,073,485
-
-
-
1 JAN 17
19,277,931
-
†14,073,485
-
-
-
†These non-beneficial holdings are duplicated with those of Sir Michael Heller.
The beneficial holdings of Directors shown above include their interests in the Share Incentive Plan.
THE FOLLOWING INFORMATION IS UNAUDITED:
The graph illustrates the Company’s performance as compared with a broad equity market index over a five year period. Performance is
measured by total shareholder return. The directors have chosen the FTSE All Share – Total Return Index as a suitable index for this
comparison as it gives an indication of performance against a large spread of quoted companies.
The middle market price of London & Associated Properties PLC ordinary shares at 31 December 2017 was 24.50p (2016: 21p). During the
year the share middle market price ranged between 18.25p and 24.50p.
Total Shareholder Return
220
200
180
160
140
120
100
80
31/12/2012
31/12/2013
31/12/2014
31/12/2015
31/12/2016
31/12/2017
–– London & Associated Properties
–– FTSE All Share Index
22 London & Associated Properties PLC 2017
GOVERNANCE Annual remuneration report
REMUNERATION OF THE CHIEF EXECUTIVE OVER THE LAST TEN YEARS
YEAR
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
CEO
J A Heller
J A Heller
J A Heller
J A Heller
J A Heller
J A Heller
J A Heller
J A Heller
J A Heller
J A Heller
CHIEF EXECUTIVE SINGLE
TOTAL FIGURE OF
REMUNERATION
£'000
487
569
762
835
716
417
671
577
982
688
ANNUAL BONUS PAYMENT
AGAINST MAXIMUM
OPPORTUNITY*
%
11%
18%
41 %
49 %
n/a
n/a
n/a
n/a
n/a
n/a
LONG-TERM INCENTIVE
VESTING RATES
AGAINST MAXIMUM
OPPORTUNITY*
%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
*There were no formal criteria or conditions to apply in determining the amount of bonus payable or the number of shares to be issued prior to 2014.
PERCENTAGE CHANGE IN CHIEF EXECUTIVE’S REMUNERATION (AUDITED)
The table below shows the percentage change in Chief Executive remuneration for the prior year compared to the average percentage
change for all other Head Office based employees. To provide a meaningful comparison, the same group of employees (although not
necessarily the same individuals) appears in the 2016 and 2017 group. The remuneration committee chose head office based employees as
the comparator group as this group forms the closest comparator group.
Base salary and allowances
Taxable benefits
Annual bonus
Total
CHIEF EXECUTIVE
£'000
HEAD OFFICE EMPLOYEES
£'000
2017
333
37
100
470
2016
333
40
166
539
% CHANGE
0%
(7.5%)
(39.75%)
(12.8%)
2017
643
81
80
804
2016
692
77
97
866
% CHANGE
(7.1%)
5.2%
(17.5%)
(7.2%)
RELATIVE IMPORTANCE OF SPEND ON PAY
The total expenditure of the Group on remuneration to all employees (Note 29 refers) is shown below:
Employee Remuneration
Distributions to shareholders
STATEMENT OF IMPLEMENTATION OF
REMUNERATION POLICY
The policy was approved at the AGM in June 2017 and was effective
from 6 June 2017. The vote on the remuneration policy is binding in
nature. The Company may not then make a remuneration payment
or payment for loss of office to a person who is, is to be, or has been
a director of the Company unless that payment is consistent with the
approved remuneration policy, or has otherwise been approved by a
resolution of members. It is to be presented for approval at the
forthcoming AGM.
2017
£'000
8,113
141
2016
£'000
7,173
136
CONSIDERATION BY THE DIRECTORS OF MATTERS
RELATING TO DIRECTORS’ REMUNERATION
The Remuneration Committee considered the executive Directors’
remuneration and the board considered the non-executive Directors’
remuneration in the year ended 31 December 2017. No increases
were awarded and no external advice was taken in reaching this
decision.
SHAREHOLDER VOTING
At the Annual General Meeting on 6 June 2017, there was an
advisory vote on the resolution to approve the Remuneration Report,
other than the part containing the remuneration policy.
In addition, on 6 June 2017, there was a binding vote on the
resolution to approve the Remuneration Policy. The results are
detailed below:
Resolution to approve the Remuneration Report
Resolution to approve the Remuneration Policy
% OF VOTES
FOR
83.16
83.14
% OF VOTES
AGAINST
0.18
16.69
NUMBER OF VOTES
WITHHELD
9,765,315
89,602
London & Associated Properties PLC 2017 23
GOVERNANCE
Remuneration policy
INTRODUCTION
Set out below is the LAP Group policy on directors’
remuneration (excluding Bisichi). This policy was
approved at the 2017 AGM and it is effective from
6 June 2017. Unless changed it will be presented
next for approval at the AGM in 2020.
FUTURE POLICY TABLE
A copy of the full policy can be found at www.lap.co.uk.
In setting the policy, the Remuneration Committee has taken
the following into account:
• The need to attract, retain and motivate individuals of a
calibre who will ensure successful leadership and
management of the company
PURPOSE
Pension
ELEMENT
Executive directors
Base salary
To recognise:
Skills
Responsibility
Accountability
Experience
Value
To provide competitive retirement benefits
Benefits
To provide a competitive benefits package
Annual
bonus
To reward and incentivise
POLICY
OPERATION
OPPORTUNITY AND PERFORMANCE CONDITIONS
Considered by remuneration committee on appointment
Set at a level considered appropriate to attract, retain, motivate and
reward the right individuals
Reviewed annually whenever there is a change
There is no prescribed maximum salary or maximum rate of increase
of role or operational responsibility
Paid monthly in cash
No individual director will be awarded a base salary in excess of £700,000 a year
No specific performance conditions are attached to base salaries
Company contribution offered at up to 10% of base salary as part of
overall remuneration package
Contractual benefits include:
Car or car allowance
Group health cover
Death in service cover
Permanent health insurance
In assessing the performance of the executive team, and in particular to
determine whether bonuses are merited the remuneration committee
takes into account the overall performance of the business, as well as
individual contribution to the business in the period
The contribution payable by the Company is
Company contribution offered at up to 10% of base salary as part of overall
included in the director’s contract of employment
remuneration package
Paid into money purchase schemes
No specific performance conditions are attached to pension contributions
The committee retains the discretion to approve
The costs associated with benefits offered are closely controlled and reviewed on an
changes in contractual benefits in exceptional
circumstances or where factors outside the
control of the Group lead to increased costs
(e.g. medical inflation)
annual basis
No director will receive benefits of a value in excess of 30% of their base salary
No specific performance conditions are attached to contractual benefits
The remuneration committee determines the
level of bonus on an annual basis
The current maximum bonus will not exceed 200% of base salary in any one year
but the remuneration committee reserves the power to award up to 300% in an
In assessing performance consideration is given
exceptional year
to the level of net rental income, cash flow, voids,
Performance conditions will be assessed on an annual basis
The performance measures applied may be financial, non-financial, corporate,
divisional or individual and in such proportion as the remuneration committee
considers appropriate
realised development gains and income from
managing joint ventures. Achieved results are
then compared with expectation taking account
of market conditions
Bonuses are generally offered in cash or shares
Offered at appropriate times by the
remuneration committee
Entitlements to share options granted under the Approved Option scheme are not
subject to performance criteria. Share Options granted under the Unapproved Scheme
are subject to the performance criteria specified in the Scheme rules
The aggregate number of shares over which options may be granted under all of the
company’s option schemes (including any options and awards granted under the
company’s employee share plans) in any period of ten years, will not exceed, at the
time of grant, 10 % of the ordinary share capital of the company from time to time
Share options will be offered by the remuneration committee as appropriate
in ‘Free Shares’ under the SIP scheme rules
Reviewed annually
No individual non-executive director will be awarded a base salary in excess of
£40,000 a year
No performance conditions are attached to base salaries
The committee retains the discretion to approve
The costs associated with benefits offered are closely controlled and reviewed on an
changes in contractual benefits in exceptional
circumstances or where factors outside the
control of the Group lead to increased costs (e.g.
annual basis
medical inflation)
No non-executive director will receive benefits in excess of £10,000 a year
No specific performance conditions are attached to contractual benefits
Share
options
To provide executive directors with
a long-term interest in the company
Share options may be granted under existing schemes (see page 21)
Where it is necessary to attract, retain, motivate and reward the right
individuals, the directors may establish new schemes to replace any
expired schemes
Share incentive
plan (SIP)
To offer a shorter term incentive in the
company and to give directors a stake
in the group
Non-executive directors
Base salary
To recognise:
Skills
Responsibility
Experience
Risk
Value
Pension
Benefits
Share
options
Offered to executive directors and head office staff
Maximum participation levels are set by HMRC Of any bonus awarded, Directors may opt to have maximum of £3,000 per year paid
Considered by the board on appointment
Set at a level considered appropriate to attract, retain and motivate the
individual
Experience and time required for the role are considered on
appointment
No pension offered
No benefits offered except to one non-executive director who is
eligible for health cover (see annual remuneration report page 20)
Non-executive directors do not participate in the share option schemes
Notes to the Remuneration Policy
The remuneration committee considers the performance measures outlined in the table above to be appropriate measures of performance
and that the KPIs chosen align the interests of the directors and shareholders.
24 London & Associated Properties PLC 2017
GOVERNANCE Remuneration policy
• The LAP Group’s general aim of seeking to reward all employees
fairly according to the nature of their role and their performance
• Remuneration packages offered to similar companies within the
same sector
• The need to align the interests of shareholders as a whole with
the long-term growth of the Group; and
• The need to be flexible and adjust with operational changes
throughout the term of this policy
The remuneration of non-executive directors is determined by the
board, and takes into account additional remuneration for services
outside the scope of the ordinary duties of non-executive directors.
FUTURE POLICY TABLE
ELEMENT
PURPOSE
Executive directors
Base salary
To recognise:
Skills
Responsibility
Accountability
Experience
Value
Pension
To provide competitive retirement benefits
Company contribution offered at up to 10% of base salary as part of
Benefits
To provide a competitive benefits package
Contractual benefits include:
overall remuneration package
Car or car allowance
Group health cover
Death in service cover
Permanent health insurance
Annual
bonus
To reward and incentivise
In assessing the performance of the executive team, and in particular to
determine whether bonuses are merited the remuneration committee
takes into account the overall performance of the business, as well as
individual contribution to the business in the period
Share
options
To provide executive directors with
a long-term interest in the company
Share options may be granted under existing schemes (see page 21)
Where it is necessary to attract, retain, motivate and reward the right
individuals, the directors may establish new schemes to replace any
expired schemes
Share incentive
plan (SIP)
To offer a shorter term incentive in the
company and to give directors a stake
in the group
Non-executive directors
Base salary
To recognise:
Skills
Responsibility
Experience
Risk
Value
Pension
Benefits
Share
options
Experience and time required for the role are considered on
individual
appointment
No pension offered
No benefits offered except to one non-executive director who is
eligible for health cover (see annual remuneration report page 20)
Non-executive directors do not participate in the share option schemes
POLICY
OPERATION
OPPORTUNITY AND PERFORMANCE CONDITIONS
Considered by remuneration committee on appointment
Set at a level considered appropriate to attract, retain, motivate and
reward the right individuals
Reviewed annually whenever there is a change
of role or operational responsibility
Paid monthly in cash
There is no prescribed maximum salary or maximum rate of increase
No individual director will be awarded a base salary in excess of £700,000 a year
No specific performance conditions are attached to base salaries
The contribution payable by the Company is
included in the director’s contract of employment
Paid into money purchase schemes
The committee retains the discretion to approve
changes in contractual benefits in exceptional
circumstances or where factors outside the
control of the Group lead to increased costs
(e.g. medical inflation)
Company contribution offered at up to 10% of base salary as part of overall
remuneration package
No specific performance conditions are attached to pension contributions
The costs associated with benefits offered are closely controlled and reviewed on an
annual basis
No director will receive benefits of a value in excess of 30% of their base salary
No specific performance conditions are attached to contractual benefits
The remuneration committee determines the
level of bonus on an annual basis
In assessing performance consideration is given
to the level of net rental income, cash flow, voids,
realised development gains and income from
managing joint ventures. Achieved results are
then compared with expectation taking account
of market conditions
Bonuses are generally offered in cash or shares
Offered at appropriate times by the
remuneration committee
The current maximum bonus will not exceed 200% of base salary in any one year
but the remuneration committee reserves the power to award up to 300% in an
exceptional year
Performance conditions will be assessed on an annual basis
The performance measures applied may be financial, non-financial, corporate,
divisional or individual and in such proportion as the remuneration committee
considers appropriate
Entitlements to share options granted under the Approved Option scheme are not
subject to performance criteria. Share Options granted under the Unapproved Scheme
are subject to the performance criteria specified in the Scheme rules
The aggregate number of shares over which options may be granted under all of the
company’s option schemes (including any options and awards granted under the
company’s employee share plans) in any period of ten years, will not exceed, at the
time of grant, 10 % of the ordinary share capital of the company from time to time
Share options will be offered by the remuneration committee as appropriate
Offered to executive directors and head office staff
Maximum participation levels are set by HMRC Of any bonus awarded, Directors may opt to have maximum of £3,000 per year paid
in ‘Free Shares’ under the SIP scheme rules
Considered by the board on appointment
Set at a level considered appropriate to attract, retain and motivate the
Reviewed annually
No individual non-executive director will be awarded a base salary in excess of
£40,000 a year
No performance conditions are attached to base salaries
The committee retains the discretion to approve
changes in contractual benefits in exceptional
circumstances or where factors outside the
control of the Group lead to increased costs (e.g.
medical inflation)
The costs associated with benefits offered are closely controlled and reviewed on an
annual basis
No non-executive director will receive benefits in excess of £10,000 a year
No specific performance conditions are attached to contractual benefits
London & Associated Properties PLC 2017 25
GOVERNANCE
Audit committee report
The committee’s terms of reference have been
approved by the board and follow published
guidelines, which are available on request from
the company secretary.
At the year end the audit committee comprised two of the non-
executive directors – H D Goldring and C A Parritt, both of whom
are Chartered Accountants.
The audit committee’s primary tasks are to:
MEETINGS
The committee meets at least twice prior to the publication of the
annual results and discusses and considers the half year results prior
to their approval by the board. The audit committee meetings are
attended by the external audit partner, chief executive, finance
director and company secretary. During the year the members of the
committee also meet on an informal basis to discuss any relevant
matters which may have arisen. Additional formal meetings may be
held as necessary.
• review the scope of external audit, to receive regular reports from
During the past year the committee:
RSM UK Audit LLP and to review the half-yearly and annual
accounts before they are presented to the board, focusing in
particular on accounting policies and areas of management
judgement and estimation;
• monitor the controls which are in force to ensure the integrity of
the information reported to the shareholders;
• act as a forum for discussion of internal control issues and
contribute to the board’s review of the effectiveness of the
Group’s internal control and risk management systems and
processes;
• to review the risk assessments made by management, consider key
risks with action taken to mitigate these and to act as a forum for
discussion of risk issues and contribute to the board’s review of
the effectiveness of the Group’s risk management control and
processes;
• consider once a year the need for an internal audit function;
• advise the board on the appointment of the external auditors, the
rotation of the audit partner every five years and on their
remuneration for both audit and non-audit work; discuss the
nature and scope of their audit work and undertake a formal
assessment of their independence each year, which includes:
i)
ii)
a review of non-audit services provided to the Group and
related fees;
discussion with the auditors of their written report detailing all
relationships with the Company and any other parties that
could affect independence or the perception of independence;
iii) a review of the auditors’ own procedures for ensuring the
independence of the audit firm and partners and staff involved
in the audit, including the regular rotation of the audit partner;
and
iv) obtaining a written confirmation from the auditors that, in
their professional judgement, they are independent.
• met with the external auditors, and discussed their reports to the
audit committee;
• approved the publication of annual and half year financial results;
• considered and approved the annual review of internal controls;
• decided that there was no current need for an internal audit
function;
• agreed the independence of the auditors and approved their fees
for both audit and non-audit services as set out in Note 2 to the
financial statements; and
• the chairman of the audit committee has also had separate
meetings and discussions with the external audit partner.
FINANCIAL REPORTING
As part of its role, the Audit Committee assessed the audit findings
that were considered most significant to the financial statements,
including those areas requiring significant judgement and/or
estimation. When assessing the identified financial reporting matters,
the committee assessed quantitative materiality primarily by
reference to the carrying value of the group’s total assets, given that
the group operates a principally asset based business. When
determining quantitative materiality, the Board also gave
consideration to the value of revenues generated by the group and
net asset value, given that they are key trading and business KPIs.
The qualitative aspects of any financial reporting matters identified
during the audit process were also considered when assessing their
materiality. Based on the considerations set out above we have
considered quantitative errors individually or in aggregate in excess
of approximately £0.8 million in relation to the consolidated balance
sheet and £0.3 million for underlying profitability and the Bisichi
group to be material.
EXTERNAL AUDITOR
RSM UK Audit LLP held office throughout the period under review.
In the United Kingdom London & Associated Properties PLC
provides extensive administration and accounting services to Bisichi
Mining PLC, which has its own audit committee and employs BDO
LLP, a separate and independent firm of registered auditor.
C A Parritt
Chairman – Audit Committee
27 April 2018
26 London & Associated Properties PLC 2017
GOVERNANCE
Directors’ responsibilities statement
The Directors are responsible for preparing the
Strategic Report and the Directors’ Report, the
Directors’ Remuneration Report and the
financial statements in accordance with
applicable law and regulations.
English company law requires the Directors to prepare Group and
Company financial statements for each financial year. The Directors
are required under the Listing Rules of the Financial Conduct
Authority to prepare Group financial statements in accordance with
International Financial Reporting Standards (“IFRS”) as adopted by
the European Union (“EU”) and have elected under English company
law to prepare the Company financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law) including FRS101
‘Reduced Disclosure Framework’.
The Group financial statements are required by law and IFRS
adopted by the EU to present fairly the financial position and
performance of the Group; the Companies Act 2006 provides in
relation to such financial statements that references in the relevant
part of that Act to financial statements giving a true and fair view are
references to their achieving a fair presentation.
Under English company law the Directors must not approve the
financial statements unless they are satisfied that they give a true
and fair view of the state of affairs of the Group and the Company
and of the profit or loss of the Group for that period.
In preparing each of the Group and Company financial statements,
the Directors are required to:
a. select suitable accounting policies and then apply them
consistently;
b. make judgements and accounting estimates that are reasonable
and prudent;
c. for the Group financial statements, state whether they have been
prepared in accordance with IFRS adopted by the EU and for the
company financial statements state whether applicable UK
accounting standards have been followed, subject to any material
departures disclosed and explained in the financial statements;
and
d. prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the Group and the Company
will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group’s and the
Company’s transactions and disclose with reasonable accuracy at any
time the financial position of the Group and the Company and
enable them to ensure that the financial statements and the
Directors’ Remuneration Report comply with the Companies Act
2006 and, as regards the Group financial statements, Article 4 of the
IAS Regulations. They are also responsible for safeguarding the
assets of the Group and the Company and hence for taking
reasonable steps for the prevention and detection of fraud and other
irregularities.
DIRECTORS’ STATEMENT PURSUANT TO THE
DISCLOSURE GUIDANCE AND TRANSPARENCY RULES
Each of the directors, whose names and functions are listed on
page 12, confirms that to the best of each person’s knowledge:
a. the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view of
the assets, liabilities, financial position and profit of the Company
and the undertakings included in the consolidation taken as a
whole; and
b. the Strategic Report contained in the Annual Report includes a fair
review of the development and performance of the business and
the position of the Company and the undertakings included in the
consolidation taken as a whole, together with a description of the
principal risks and uncertainties that they face.
The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the London &
Associated Properties PLC website.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in
other jurisdictions.
London & Associated Properties PLC 2017 27
GOVERNANCE
Independent auditor’s report
TO THE MEMBERS OF LONDON & ASSOCIATED PROPERTIES PLC
Opinion
We have audited the financial statements of
London & Associated Properties PLC (“the
parent company”) and its subsidiaries (“the
group”) for the year ended 31 December 2017
which comprise the consolidated income
statement, the consolidated statement of
comprehensive income, the consolidated
balance sheet, the consolidated statement of
changes in equity, the consolidated cash flow
statement, the parent company balance sheet,
the parent company statement of changes in
equity and notes to the financial statements,
including a summary of significant accounting
policies. The financial reporting framework that
has been applied in the preparation of the
group financial statements is applicable law and
International Financial Reporting Standards
(IFRSs) as adopted by the European Union. The
financial reporting framework that has been
applied in the preparation of the parent
company financial statements is applicable law
and United Kingdom Accounting Standards
including FRS 101 “Reduced Disclosure
Framework (United Kingdom Generally
Accepted Accounting Practice).
In our opinion:
• the financial statements give a true and fair view of the state of
the group’s and of the parent company’s affairs as at 31 December
2017 and of the group’s profit for the year then ended;
• the group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
• the parent company financial statements have been properly
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
• the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006 and, as regards the
group financial statements, Article 4 of the IAS Regulation.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards
on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of
our report. We are independent of the group and parent company in
accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC’s
Ethical Standard as applied to listed public interest entities, and we
have fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
CONCLUSIONS RELATING TO GOING CONCERN
We have nothing to report in respect of the following matters in
relation to which the ISAs (UK) require us to report to you where:
• the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is not appropriate; or
• the directors have not disclosed in the financial statements any
identified material uncertainties that may cast significant doubt
about the group’s or the parent company’s ability to continue to
adopt the going concern basis of accounting for a period of at
least twelve months from the date when the financial statements
are authorised for issue.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to fraud)
that we identified. These matters included those which had the
greatest effect on: the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the engagement
team. These matters were addressed in the context of our audit of
the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
28 London & Associated Properties PLC 2017
GOVERNANCE Independent auditor’s report
VALUATION OF INVESTMENT PROPERTIES
The group’s properties are accounted for in the financial statements
as investment properties under IAS 40 and held at fair value. The
investment properties are valued by two firms of external third party
valuers and these valuations are adopted in the financial statements.
At 31 December 2017 investment property valued at £78.0m (Note
10) was disclosed within non-current assets in the financial
statements. Separately, property valued at £36.4m (Note 14) was
disclosed as assets held for sale, within current assets.
The directors’ assessment of the fair value of investment properties
is considered a key audit matter due to the relative importance of
these assets to the group’s financial statements, the potential impact
of movements in the fair values of the assets, and the subjectivity
and complexity of the valuation process, which involves significant
judgements and estimates as disclosed on page 37 of the financial
statements.
The valuation is carried out by two firms of professional external
valuers together with, in respect of one property, an internal valuer in
accordance with the methodology described in Note 10.
Our response to the key audit matter included:
ACCURACY OF LIFE OF MINE ESTIMATES
The mining assets amounted to £8.5m as at 31 December 2017
(2016: £8.4m) and relate to the South African mining operations.
These assets represent a significant part of the Bisichi group’s
balance sheet (see Note 11).
Bisichi’s management performed an impairment assessment based
on the Bisichi Board’s approved Life of Mine plan at 31 December
2017 as detailed in the key judgements and estimates Note on page
37.
The assessment by Bisichi management of inputs to the Life of Mine
plan requires significant judgment and estimate, including
determination of forecast coal prices, production, coal reserves and
costs. These factors caused this area to be a significant focus for our
audit.
Management’s discounted cash flow impairment assessment,
including the underlying Life of Mine plan, was evaluated. In doing
so, key inputs to the model including forecast coal prices, exchange
rates, production, costs and the discount rate were critically
assessed. This included assessment compared to empirical data and
trends, pricing information and market data.
• agreeing the valuations of all properties recorded in the financial
statements and subject to the external valuation process to the
valuation reports prepared by the valuers. These reports covered
all except £1.8m of the value of investment properties, which were
subject to internal valuation;
In respect of the coal reserves included in the model, the
independent Competent Person’s Report was reviewed and
discussions were held with the Competent Person. In relying on the
Competent Person their independence and competence was
assessed.
• agreeing the carrying value (sales price less costs to sell) of the
Brixton Village and Market Row properties, included as assets held
for sale, to the agreement for sale, and the costs to invoices;
Sensitivity analysis was performed on the impairment model in
respect of factors such as pricing, costs, yields, exchange rates and
the discount rate.
• assessing the qualifications and expertise of the valuers, and
considering their objectivity and any threats to their
independence. We concluded that there was no threat which
might impair the valuers’ independence and objectivity; and
• challenging and discussing the assumptions used with the valuers,
both external and internal, and comparing the key inputs to the
valuation to underlying records of the leases and records of rents
received and against our knowledge of market yields.
Our findings
The carrying values of the investment properties are consistent with
the valuation reports provided and, in the case of assets held for sale,
with the agreed selling price less direct costs to sell.
The disclosures in the key judgements and estimates note were
evaluated based on the audit procedures.
Our findings
The work on the impairment test found Bisichi management’s
conclusion that no impairment exists to be appropriate. The key
assumptions were found to be balanced and appropriately
considered by Bisichi management and the disclosures in the key
judgements and estimates note to be sufficient.
London & Associated Properties PLC 2017 29
GOVERNANCE Independent auditor’s report
IMPAIRMENT OF EZIMBOKODWENI
As at 31 December 2016 the group’s net investment in
Ezimbokedweni Mining (Pty) Limited (“Ezimbokedweni”), an equity
accounted joint venture, was £1.8m (Notes 12 and 13). The carrying
value was dependent upon the ultimate completion of a sale and
purchase agreement to acquire the Pegasus coal project in South
Africa, under which a deposit had been paid by Ezimbokedweni.
During the year the joint venture was placed into Business Rescue
under the South African Companies Act by the joint venture partner.
The original deposit has been returned to Ezimbokodweni and as a
result, the Bisichi Board considers there to be no reasonable
prospect of the Pegasus coal project transaction completing.
Further to these developments, the Bisichi Board performed an
impairment review of the carrying value of the net investment in
Ezimbokodweni and recorded an impairment of the net investment
of £1.8m, with any further movements since 31 December 2016
reflecting foreign exchange differences.
The assessment of the carrying value, subsequent impairment and
associated disclosure represented a significant focus for our audit.
Additionally, the tax treatment of this transaction was considered to
be an area of risk of material misstatement. This was also considered
to be an area requiring specialist knowledge and expertise.
Specific inquiries were made of Bisichi’s management and Board to
gain an understanding of the fact pattern and events during the year
regarding Ezimbokedweni.
Minutes of Bisichi Board meetings, legal documents and
correspondence relating to the joint venture, the Business Rescue
and assessments of the resulting financial position and interests of
the joint venture were reviewed.
The Bisichi Board’s conclusion that the net investment is impaired
based on the facts and circumstances, including assessment of the
probability of value being recovered from the joint venture was
assessed.
The tax treatment of the transaction applied by Bisichi management
was assessed in conjunction with specialists.
The accounting entries in respect of the impairment as well as the
disclosures in Note 12 and the key judgements and estimates note
were assessed.
Our findings
The judgements made by Bisichi management relating to the
impairment recorded by the group are considered to be appropriate
based on the developments during the year. The disclosures at Note
12 and the key judgements and estimates note are also considered
to be acceptable.
OUR APPLICATION OF MATERIALITY
When establishing our overall audit strategy, we set certain thresholds
which help us to determine the nature, timing and extent of our
audit procedures and to evaluate the effects of misstatements, both
individually and on the financial statements as a whole.
During planning we determined a magnitude of uncorrected
misstatements that we judge would be material for the financial
statements as a whole (FSM). During planning FSM was calculated
as £1.1m, which was not changed during the course of our audit.
30 London & Associated Properties PLC 2017
The London & Associated Properties PLC group consists of two
distinct components: a UK based property investment group, and a
fully listed mining group carrying out mining operations in South
Africa with a relatively small investment property portfolio.
During planning, we determined materiality in respect of these
components at:
• for the London & Associated Properties PLC property investment
sub group balance sheet, £0.8 million and to underlying
profitability £0.3 million; and
• for the Bisichi Mining PLC coal mining and property investment
sub group, £0.3 million.
We agreed with the audit committee that we would report to them
all unadjusted differences in excess of £15,000 for both components
of the group. We also agreed to report other differences below that
threshold which, in our view, warranted reporting for other reasons.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
The audit was scoped to support our audit opinion on the company
and group financial statements of London & Associated Properties
PLC and was based on group materiality and an assessment of risk at
group level. We planned our 2017 audit on the understanding that
the activities of the group had changed very little from the previous
year, and that there had been no changes in the valuation
methodologies to be applied, or the accounting standards applicable
to the group and company’s financial statements.
The group comprises 27 trading, or active holding, companies and 12
dormant companies. Full scope audits, using component materiality,
were performed on 24 of the active entities with the other three
entities subjected to desktop review. Six of the full scope audits and the
three desktop reviews were performed by component auditors whose
work we evaluated and reviewed for the purpose of the group audit.
This resulted in coverage of 100% of total revenues and profit before
tax of the group, and 100% of total gross assets of the group.
OTHER INFORMATION
The other information comprises the information included in the
annual report other than the financial statements, the audited part of
the directors’ remuneration report and our auditor’s report thereon.
The directors are responsible for the other information.
Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon. In
connection with our audit of the financial statements, our responsibility
is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements
or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If we identify such material inconsistencies or
apparent material misstatements, we are required to determine whether
there is a material misstatement in the financial statements or a material
misstatement of the other information.
If, based on the work we have performed, we conclude that there is
a material misstatement of the other information, we are required to
report that fact. We have nothing to report in this regard.
GOVERNANCE Independent auditor’s report
OPINIONS ON OTHER MATTERS PRESCRIBED BY
THE COMPANIES ACT 2006
In our opinion, the part of the directors’ remuneration report to be
audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’
report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
• the strategic report and the directors’ report have been prepared
in accordance with applicable legal requirements.
MATTERS ON WHICH WE ARE REQUIRED TO
REPORT BY EXCEPTION
In the light of the knowledge and understanding of the group and
the parent company and their environment obtained in the course of
the audit, we have not identified material misstatements in the
strategic report or the directors’ report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
• adequate accounting records have not been kept by the parent
As part of our audit, we will consider the susceptibility of the group
and parent company to fraud and other irregularities, taking account
of the business and control environment established and maintained
by the directors, as well as the nature of transactions, assets and
liabilities recorded in the accounting records. Owing to the inherent
limitations of an audit, there is an unavoidable risk that some material
misstatements of the financial statements may not be detected, even
though the audit is properly planned and performed in accordance
with the ISAs. However, the principal responsibility for ensuring that
the financial statements are free from material misstatement,
whether caused by fraud or error, rests with management who
should not rely on the audit to discharge those functions.
A further description of our responsibilities for the audit of the
financial statements is located on the Financial Reporting Council’s
website at: http://www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
OTHER MATTERS WHICH WE ARE REQUIRED TO
ADDRESS
Following the recommendation of the audit committee, we were
appointed by the Board of Directors on 27 July 1987 to audit the
financial statements for the year ended 31 December 1987 and
subsequent financial periods.
company, or returns adequate for our audit have not been
received from branches not visited by us; or
The period of total uninterrupted engagement is 31 years, covering
the years ending 31 December 1987 to 2017.
• the parent company financial statements and the part of the
directors’ remuneration report to be audited are not in agreement
with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are
The non-audit services prohibited by the FRC’s Ethical Standard
were not provided to the group or the parent company and we
remain independent of the group and the parent company in
conducting our audit.
not made; or
• we have not received all the information and explanations we
require for our audit.
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the directors’ responsibilities statement set
out on page 27 the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the directors determine
is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible
for assessing the group’s and the parent company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent company
or to cease operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF
THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
During the period under review agreed upon procedures under ISRS
4400 were completed in respect of a number of the group’s service
charge account, and in respect of two deeds of release relating to
two debentures.
Our audit opinion is consistent with the additional report to the audit
committee.
This report is made solely to the company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company’s members as a body, for
our audit work, for this report, or for the opinions we have formed.
Geoff Wightwick (Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
25 Farringdon Street
London
EC4A 4AB
27 April 2018
London & Associated Properties PLC 2017 31
financial state-
ments
FINANCIAL
STATEMENTS
Consolidated income statement
for the year ended 31 December 2017
Group revenue
Operating costs
Gain on disposal of other investments
Income from listed investments held for trading
Operating profit
Finance income
Finance expenses
Debenture break cost
Result before revaluation and other movements
Non–cash changes in valuation of assets and liabilities and other movements
Increase in value of investment properties
Write off investment in joint venture
Increase in trading investments
Increase in value of other investments
Adjustment to interest rate derivative
Profit/(loss) for the year before taxation
Income tax charge
Profit/(loss) for the year
Attributable to:
Equity holders of the Company
Non–controlling interest
Profit/(loss) for the year
Earnings per share
Profit/(loss) per share – basic and diluted
NOTES
1
3
5
5
23
10
12, 13
23
2
6
27
2017
£'000
44,979
(37,428)
3
–
7,554
105
(4,268)
(14)
3,377
9,373
(1,827)
–
–
355
11,278
(2,982)
8,296
7,686
610
8,296
2016
£'000
29,704
(26,860)
–
2
2,846
144
(4,292)
–
(1,302)
532
–
1
12
(217)
(974)
(1,175)
(2,149)
(2,357)
208
(2,149)
9
9.01p
(2.77)p
Consolidated statement of comprehensive income
for the year ended 31 December 2017
Profit/(loss) for the year
Other comprehensive income/(expense):
Items that may be subsequently recycled to the income statement:
Exchange differences on translation of Bisichi Mining PLC foreign operations
Transfer of gain on available for sale investments
Taxation
Other comprehensive income for the year net of tax
Total comprehensive income/(expense) for the year net of tax
Attributable to:
Equity shareholders
Non–controlling interest
32 London & Associated Properties PLC 2017
2017
£'000
8,296
91
103
(20)
174
8,470
7,753
717
8,470
2016
£'000
(2,149)
1,106
193
(13)
1,286
(863)
(1,864)
1,001
(863)
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Consolidated balance sheet
at 31 December 2017
Non–current assets
Market value of properties attributable to Group
Present value of head leases
Property
Mining reserves, plant and equipment
Investments in joint ventures
Loan to joint venture
Held to maturity investments
Other investments
Deferred tax
Current assets
Inventories
Assets held for sale
Trade and other receivables
Interest rate derivatives
Corporation tax recoverable
Available for sale investments
Investments held for trading
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Non–current liabilities
Borrowings
Interest rate derivatives
Present value of head leases on properties
Provisions
Deferred tax liabilities
Total liabilities
Net assets
Equity attributable to the owners of the parent
Share capital
Share premium account
Translation reserve (Bisichi Mining PLC)
Capital redemption reserve
Retained earnings (excluding treasury shares)
Treasury shares
Retained earnings
Total equity attributable to equity shareholders
Non–controlling interest
Total equity
Net assets per share
Diluted net assets per share
NOTES
2017
£'000
2016
£'000
10
31
11
12
13
17
17
24
16
14
18
23
19
19
20
21
21
23
31
22
25
26
26
27
9
9
78,025
3,233
81,258
8,735
–
–
1,748
51
–
91,792
828
36,441
7,132
1
–
1,050
19
7,528
52,999
144,791
(12,909)
(4,288)
(358)
(17,555)
(61,661)
(435)
(3,233)
(1,349)
(3,848)
(70,526)
(88,081)
56,710
8,554
4,866
(695)
47
33,227
(145)
33,082
45,854
10,856
56,710
53.74p
53.74p
105,080
4,767
109,847
8,653
455
1,350
1,874
32
1,134
123,345
1,721
–
7,061
4
32
781
19
6,265
15,883
139,228
(12,942)
(4,108)
(21)
(17,071)
(64,401)
(793)
(4,767)
(1,236)
(2,329)
(73,526)
(90,597)
48,631
8,554
4,866
(728)
47
25,648
(145)
25,503
38,242
10,389
48,631
44.83p
44.83p
These financial statements were approved by the board of directors and authorised for issue on 27 April 2018 and signed on its behalf by:
Sir Michael Heller
Director
Anil Thapar
Director
Company Registration No. 341829
London & Associated Properties PLC 2017 33
FINANCIAL STATEMENTS
Consolidated statement of changes in
shareholders’ equity
for the year ended 31 December 2017
SHARE
CAPITAL
£'000
8,554
–
SHARE
PREMIUM
£'000
4,866
–
TRANSLATION
RESERVES
£'000
(1,145)
–
CAPITAL
REDEMPTION
RESERVE
£'000
47
–
TREASURY
SHARES
£'000
(482)
–
RETAINED
EARNINGS
EXCLUDING
TREASURY
SHARES
£'000
28,238
(2,357)
TOTAL
EXCLUDING
NON–
CONTROLLING
INTERESTS
£'000
40,078
(2,357)
NON–
CONTROLLING
INTERESTS
£'000
TOTAL
EQUITY
£'000
9,574 49,652
(2,149)
208
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8,554
–
–
–
–
–
–
–
4,866
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8,554
–
4,866
417
–
417
417
–
–
–
–
–
–
(728)
–
33
–
33
33
–
–
–
(695)
–
–
–
–
–
–
–
–
–
–
47
–
–
–
–
–
–
–
–
–
–
–
–
–
–
119
218
337
(145)
–
–
–
–
–
–
–
–
417
689
1,106
76
76
(2,281)
45
(136)
–
–
(218)
(309)
25,648
7,686
76
493
(1,864)
45
(136)
–
119
–
28
38,242
7,686
104
793
1,001
180
1,286
(863)
64
–
(250)
–
–
(186)
109
(136)
(250)
119
–
(158)
10,389 48,631
8,296
610
–
34
33
34
58
49
91
83
34
7,720
67
7,753
107
717
174
8,470
(141)
–
(141)
–
–
(250)
(141)
(250)
–
47
–
(145)
(141)
33,227
(141)
45,854
(250)
(391)
10,856 56,710
Balance at 1 January 2016
Loss for year
Other comprehensive expense:
Currency translation
Gain on available for sale investments
(net of tax)
Total other comprehensive expense
Total comprehensive expense
Transactions with owners:
Share options charge
Dividends – equity holders
Dividends – non–controlling interests
Disposal of own shares
Loss on transfer of own shares
Transactions with owners
Balance at 31 December 2016
Profit for year
Other comprehensive income:
Currency translation
Gain on available for sale
investments (net of tax)
Total other comprehensive income
Total comprehensive income/
(expense)
Transactions with owners:
Dividends – equity holders
Dividends – non–controlling
interests
Transactions with owners
Balance at 31 December 2017
34 London & Associated Properties PLC 2017
FINANCIAL STATEMENTS
Consolidated cash flow statement
for the year ended 31 December 2017
Operating activities
Profit/(loss) for the year before taxation
Finance income
Finance expense
Debenture break cost
Realised gain on disposal of other investments
Decrease in value of investment properties
Write off investment in joint venture
Increase in trading investments
Increase in value of other investments
Adjustment to interest rate derivative
Depreciation
Profit on disposal of non-current assets
Share based payment expense
Gain on investment held for trading
Exchange adjustments
Change in inventories
Change in receivables
Change in payables
Cash generated from operations
Income tax paid
Cash inflows from operating activities
Investing activities
Disposal of shares and loans held to maturity
Disposal of assets held for sale
Share of profit in joint ventures (assets held for sale)
Acquisition of investment properties, mining reserves, plant and equipment
Sale of plant and equipment
Residual receipt from Windsor Shopping Centre disposal
Interest received
Cash (outflows)/inflows from investing activities
Financing activities
Sale of treasury shares
Interest paid
Interest obligation under finance leases
Debenture stock break costs paid
Receipt of bank loan - Bisichi Mining PLC
Repayment of bank loan - Bisichi Mining PLC
Short term loan from joint ventures and related parties
Repayment of debenture stocks
Equity dividends paid
Equity dividends paid - non-controlling interests
Cash outflows from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange adjustment
Cash and cash equivalents at end of year
2017
£'000
2016
£'000
11,278
(105)
4,268
14
(3)
(9,373)
1,827
–
–
(355)
1,804
(3)
–
–
258
896
196
(415)
10,287
(14)
10,273
–
(56)
–
(1,771)
29
–
137
(1,661)
–
(3,963)
(178)
(14)
23
(25)
(30)
(750)
(141)
(250)
(5,328)
3,284
2,931
51
6,266
(974)
(144)
4,292
–
–
(532)
–
(1)
(12)
217
1,818
(32)
109
4
(449)
(258)
468
1,080
5,586
(57)
5,529
121
2,275
60
(3,022)
32
414
133
13
119
(3,943)
(216)
–
37
(131)
–
–
(136)
(250)
(4,520)
1,022
2,575
(666)
2,931
The cash flows above relate to continuing and discontinued operations. See Note 7 for information on discontinued operations.
Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash equivalents comprise the following balance sheet amounts:
Cash and cash equivalents (before bank overdrafts)
Bank overdrafts
Cash and cash equivalents at end of year
2017
£'000
7,528
(1,262)
6,266
2016
£'000
6,265
(3,334)
2,931
£120,000 of cash deposits at 31 December 2017 were charged as security to debenture stocks.
London & Associated Properties PLC 2017 35
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Group accounting policies
The following are the principal Group accounting policies:
BASIS OF ACCOUNTING
The Group financial statements are prepared in accordance with
International Financial Reporting Standards (IFRS), as adopted by the
European Union and with those parts of the Companies Act 2006
applicable to companies reporting under IFRS.
The Company has elected to prepare the parent company’s financial
statements in accordance with Financial Reporting Standard 101
’Reduced Disclosure Framework’ (FRS 101) and Companies Act 2006
and these are presented in Note 33. The financial statements are
prepared under the historical cost convention, except for the
revaluation of freehold and leasehold properties and financial assets
held for trading as well as fair value of interest derivatives.
The Group financial statements are presented in Pounds Sterling and
all values are rounded to the nearest thousand pounds (£'000)
except when otherwise stated.
The functional currency for each entity in the Group, and for joint
arrangements, is the currency of the country in which the entity has
been incorporated. Details of the country in which each entity has
been incorporated can be found in Note 15 for subsidiaries and
Note 12 for joint ventures.
The exchange rates used in the accounts were as follows:
£1 STERLING:
RAND
£1 STERLING:
DOLLAR
Year-end rate
Annual average
2017
2016
2016
16.6686 16.9472 1.35028 1.23321
17.1540 19.9269 1.29174 1.35477
2017
London & Associated Properties PLC (“LAP”), the parent company, is
a listed public company incorporated and domiciled in England and
quoted on the London Stock Exchange. The Company registration
number is 341829. LAP and its subsidiaries (“the Group”) consists of
LAP, all of its subsidiary undertakings, including Bisichi Mining PLC
(“Bisichi”) and Dragon Retail Properties Limited (“Dragon”). The
Group without Bisichi and Dragon is referred to as LAP Group.
GOING CONCERN
In reviewing going concern it is necessary to consider separately the
position of LAP Group and Bisichi. Although both are consolidated into
group accounts (as required by IFRS 10), they are managed independently
and in the unlikely event that Bisichi was unable to continue trading this
would not affect the ability of LAP Group to continue operating as a going
concern. The same would be true for Bisichi in reverse.
The directors have reviewed the cash flow forecasts of the LAP
Group and the underlying assumptions on which they are based. The
LAP Group’s business activities, together with the factors likely to
affect its future development, are set out in the Chairman and Chief
Executive’s Statement and Financial Review. In addition, Note 23 to
the financial statements sets out the Group’s objectives, policies and
processes for managing its capital; its financial risk management
objectives; details of its financial instruments and hedging activities;
and its exposure to credit risk and liquidity risk.
The directors believe that the LAP Group has adequate resources to
continue in operational existence for the foreseeable future and that
the LAP Group is well placed to manage its business risks. Thus they
continue to adopt the going concern basis of accounting in preparing
the annual financial statements.
36 London & Associated Properties PLC 2017
The Bisichi directors continue to adopt the going concern basis of
accounting in preparing the Bisichi annual financial statements.
INTERNATIONAL ACCOUNTING STANDARDS (IAS/IFRS)
The Group has adopted all of the new and revised Standards and
Interpretations issued by the International Accounting Standards
Board (“IASB”) that are relevant to its operations and effective for
accounting periods beginning 1 January 2017. An amendment to IAS
7 “Statement of Cash Flows: Disclosure Initiative”, which is
mandatory for 2017, requires entities to provide disclosures about
changes in liabilities arising from financing activities, including
changes from financing cash flows and non-cash changes (such as
foreign exchange gains or losses). This amendment has been
endorsed by the EU. The adoption of this amendment and other new
and revised Standards and Interpretations had no material effect on
the profit or loss or financial position of the Group.
The Group has not adopted any Standards or Interpretations in
advance of the required implementation dates.
IFRS 15 ‘Revenue from Contracts with Customers’ was issued by the
IASB in May 2014. It is effective for accounting periods beginning on
or after 1 January 2018. The new standard will replace existing
accounting standards, and provides enhanced detail on the principle
of recognising revenue to reflect the transfer of goods and services
to customers at a value which the company expects to be entitled to
receive. The standard also updates revenue disclosure requirements.
The standard was endorsed by the EU on 22 September 2017. The
Directors are continuing to assess the impact of IFRS 15 on the
results of the Group. Whilst management do not envisage a material
impact, the impact of adopting this standard cannot be reliably
estimated until the transition review is complete.
IFRS 9 was published in July 2014 and will be effective for the Group
from 1 January 2018. The standard was endorsed by the EU on 22
November 2017. It is applicable to financial assets and financial
liabilities, and covers the classification, measurement, impairment and
de-recognition of financial assets and financial liabilities together with
a new hedge accounting model. IFRS 9 also introduces the expected
credit loss model for impairment of financial assets. Application of the
IFRS 9 impairment model is expected to have minimal impact given
the Group’s credit risk management policies. The Directors are
continuing to assess the impact on the results of the Group and will
complete the assessment during H1 2018.
IFRS 16 ‘Leases’ – IFRS 16 ‘Leases’ was issued by the IASB in January
2017 and is effective for accounting periods beginning on or after 1
January 2019. The new standard will replace IAS 17 ‘Leases’ and will
eliminate the classification of leases as either operating leases or
finance leases and, instead, introduce a single lessee accounting
model. The standard, which has been endorsed by the EU, provides a
single lessee accounting model, specifying how leases are
recognised, measured, presented and disclosed. The Directors are
currently evaluating the financial and operational impact of this
standard including the application to service contracts at the mine
containing leases. The review of the impact of IFRS 16 will require an
assessment of all leases and the impact of adopting this standard
cannot be reliably estimated until this work is substantially complete.
The Directors do not anticipate that the adoption of the other standards
and interpretations not listed above will have a material impact on the
accounts. Certain of these standards and interpretations will, when
adopted, require addition to or amendment of disclosures in the accounts.
FINANCIAL STATEMENTS Group accounting policies
We are committed to improving disclosure and transparency and will
continue to work with our different stakeholders to ensure they
understand the detail of these accounting changes. We continue to
remain committed to a robust financial policy.
KEY JUDGEMENTS AND ESTIMATES
The preparation of the financial statements requires management to
make assumptions and estimates that may affect the reported
amounts of assets and liabilities and the reported income and
expenses, further details of which are set out below. Although
management believes that the assumptions and estimates used are
reasonable, the actual results may differ from those estimates. Further
details of the estimates are contained in the Directors’ Report.
PROPERTY OPERATIONS
Fair value measurements of investment properties and investments
An assessment of the fair value of certain assets and liabilities, in
particular investment properties, is required to be performed. In such
instances, fair value measurements are estimated based on the
amounts for which the assets and liabilities could be exchanged
between market participants. To the extent possible, the
assumptions and inputs used take into account externally verifiable
inputs. However, such information is by nature subject to
uncertainty.
MINING OPERATIONS
Life of mine and reserves
The directors consider their judgements and estimates surrounding
the life of the mine and its reserves to have significant effect on the
amounts recognised in the financial statements and to be an area
where the financial statements are at most risk of a significant
estimation uncertainty. The life of the mine remaining is currently
estimated at 4 years. This life of mine is based on the Groups
existing coal reserves and excludes future coal purchases and coal
reserve acquisitions. The Group’s estimates of proven and probable
reserves are prepared and subject to assessment by an independent
Competent Person experienced in the field of coal geology and
specifically opencast and pillar coal extraction. Estimates of coal
reserves impact assessments of the carrying value of property, plant
and equipment, depreciation calculations and rehabilitation and
decommissioning provisions. There are numerous uncertainties
inherent in estimating coal reserves and changes to these
assumptions may result in restatement of reserves. These
assumptions include geotechnical factors as well as economic factors
such as commodity prices, production costs and yield.
Depreciation, amortisation of mineral rights, mining development
costs and plant & equipment
The annual depreciation/amortisation charge is dependent on
estimates, including coal reserves and the related life of the mine,
expected development expenditure for probable reserves, the
allocation of certain assets to relevant ore reserves and estimates of
residual values of the processing plant. The charge can fluctuate
when there are significant changes in any of the factors or
assumptions used, such as estimating mineral reserves which in turn
affects the life of mine or the expected life of reserves. Estimates of
proven and probable reserves are prepared by an independent
Competent Person. Assessments of depreciation/amortisation rates
against the estimated reserve base are performed regularly. Details
of the depreciation/amortisation charge can be found in Note 11.
Provision for mining rehabilitation including restoration and
de-commissioning costs
A provision for future rehabilitation including restoration and
decommissioning costs requires estimates and assumptions to be
made around the relevant regulatory framework, the timing, extent
and costs of the rehabilitation activities and of the risk free rates used
to determine the present value of the future cash outflows. The
provisions, including the estimates and assumptions contained therein,
are reviewed regularly by management. The Group engages an
independent expert to assess the cost of restoration and decommissioning
annually as part of management’s assessment of the provision. Details
of the provision for mining rehabilitation can be found in Note 22.
MINING IMPAIRMENT
Property, plant and equipment representing the Group’s mining
assets in South Africa are reviewed for impairment at each reporting
date. The impairment test is performed using the approved Life of
Mine plan and those future cash flow estimates are discounted using
asset specific discount rates and are based on expectations about
future operations. The impairment test requires estimates about
production and sales volumes, commodity prices, proven and
probable reserves (as assessed by the Competent Person), operating
costs and capital expenditures necessary to extract reserves in the
approved Life of Mine plan. Changes in such estimates could impact
recoverable values of these assets. Details of the carrying value of
property, plant and equipment can be found in Note 11.
The impairment test indicated significant headroom as at 31 December
2017 and therefore no impairment is considered appropriate. The key
assumptions include: coal prices, including domestic coal prices based
on recent pricing and assessment of market forecasts for export coal;
production based on proven and probable reserves assessed by the
independent Competent Person and yields associated with mining areas
based on assessments by the Competent Person and empirical data.
A 9% reduction in average forecast coal prices or a 9% reduction in yield
would give rise to a breakeven scenario. However, the Bisichi directors
consider the forecasted yield levels and pricing to be achievable.
EZIMBOKODWENI JOINT VENTURE
During the year the Group wrote off its £1.8million (2016: £1.8million)
investment in Ezimbokodweni Mining (Pty) Limited (“Ezimbokodweni”)
made up of a £1.35million loan (2016: £1.35million) and a
£0.45million (2016: £0.45million) joint venture investment.
The carrying value of the investment was dependent upon the completion
of the acquisition of the Pegasus coal project (“the project”) in South Africa.
Although a proposed sale and purchase agreement had been negotiated
and a deposit paid for the project, the conclusion of the transaction had
been delayed pending the commercial transfer of the prospecting right from
the current owners of the project to Ezimbokodweni. Although the Group
has always remained committed to completing the transaction, previous
negotiations to complete the commercial acquisition of the project had
been beset by various delays outside of its control and at the beginning of
2017, the current owners of the project notified Ezimbokodweni that they
no longer wished to divest the project. More recently, the Group was
notified that an agreement was reached between the current owners of the
project and the directors of Ezimbokodweni for the deposit for the project
to be returned and any further negotiations with Ezimbokodweni to acquire
the project to be terminated.
Although, a legal claim by the Group has been issued against
Ezimbokodweni and its representatives, in order for the Group to
recover some of the investment, the Bisichi Board has exercised its
judgement and decided that it is appropriate and prudent to write off
the investment in full at this time.
London & Associated Properties PLC 2017 37
FINANCIAL STATEMENTS Group accounting policies
GOODWILL
Goodwill arising on acquisition is recognised as an intangible asset
and initially measured at cost, being the excess of the cost of the
acquired entity over the Group’s interest in the fair value of the
assets and liabilities acquired. Goodwill is carried at cost less
accumulated impairment losses. Goodwill arising from the difference
in the calculation of deferred tax for accounting purposes and fair
value in negotiations is judged not to be an asset and is accordingly
impaired on completion of the relevant acquisition.
REVENUE
Revenue comprises sales of coal, property rental income and
property management fees.
Rental income
Rental income arises from operating leases granted to tenants. An
operating lease is a lease other than a finance lease. A finance lease
is one whereby substantially all the risks and rewards of ownership
are passed to the lessee. Rental income is recognised in the Group
income statement on a straight–line basis over the term of the lease.
This includes the effect of lease incentives to tenants, which are
normally in the form of rent free periods. Contingent rents, being the
difference between the rent currently receivable and the minimum
lease payments, are recognised in property income in the periods in
which they are receivable. Rent reviews are recognised when such
reviews have been agreed with tenants.
Reverse surrender premiums
Payments received from tenants to surrender their lease obligations
are recognised immediately in the income statement.
Dilapidations
Dilapidations monies received from tenants in respect of their lease
obligations are recognised immediately in the income statement.
Other revenue
Revenue in respect of listed investments held for trading represents
investment dividends received and profit or loss recognised on
realisation. Dividends are recognised in the income statement when
the dividend is received.
PROPERTY OPERATING EXPENSES
Operating expenses are expensed as incurred and any property
operating expenditure not recovered from tenants through service
charges is charged to the income statement.
EMPLOYEE BENEFITS
Share based remuneration
The Company operates a long–term incentive plan and two share
option schemes. The fair value of the conditional awards on shares
granted under the long–term incentive plan and the options granted
under the share option scheme is determined at the date of grant.
This fair value is then expensed on a straight–line basis over the
vesting period, based on an estimate of the number of shares that
will eventually vest. At each reporting date, the fair value of the
non–market based performance criteria of the long–term incentive
plan is recalculated and the expense is revised. In respect of the
share option scheme, the fair value of options granted is calculated
using a binomial method.
PENSIONS
The Company operates a defined contribution pension scheme. The
contributions payable to the scheme are expensed in the period to
which they relate.
DEFERRED TAX
The calculation of deferred tax involves the exercise of judgement in
relation to the amount of income and gains which will be realised in
future to support the recognition of a deferred tax asset in respect of
unrelieved losses.
INTEREST RATE HEDGES
All interest rate hedges are held at fair value as valued by the hedge
provider.
Further detail is provided in Notes 21 and 23.
BASIS OF CONSOLIDATION
The Group accounts incorporate the accounts of LAP and all of its
subsidiary undertakings, together with the Group’s share of the
results and net assets of its joint ventures.
Non–controlling interests in subsidiaries are presented separately
from the equity attributable to equity owners of the parent company.
When changes in ownership in a subsidiary do not result in a loss of
control, the non–controlling shareholders’ interests are initially
measured at the non–controlling interests’ proportionate share of
the subsidiaries’ net assets. Subsequent to this, the carrying amount
of non–controlling interests is the amount of those interests at initial
recognition plus the non–controlling interests’ share of subsequent
changes in equity. Total comprehensive income is attributed to
non–controlling interests even if this results in the non–controlling
interests having a deficit balance.
SUBSIDIARIES
Subsidiaries are entities controlled by the Group. The Group controls
an entity when it is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those
returns through its power over the entity. Subsidiaries acquired
during the year are consolidated using the acquisition method. Their
results are incorporated from the date that control passes.
All intra Group transactions, balances, income and expenses are
eliminated on consolidation. Details of the Group’s trading subsidiary
companies are set out in Note 15.
The directors are required to consider the implications of IFRS 10 on
the LAP investment in Bisichi Mining PLC (“Bisichi”). Related parties
also have shareholdings in Bisichi. When combined with the 42%
held by LAP and, taking account of the wide disposition of other
shareholders, there is potential for LAP and these related parties to
exercise voting control over Bisichi. IFRS 10 makes it clear that
possible voting control is of more significance than actual
management control.
For this reason the directors have concluded that there is a
requirement to consolidate Bisichi with LAP. While, in theory, they
could achieve control, in practice they do not get involved in the day
to day operations of Bisichi. The directors have presented
consolidated accounts using the published accounts of Bisichi but it
is important to note that any figures, risks and assumptions
attributable to that company are the responsibility of the Bisichi
Board of directors who are independent from LAP.
As a result of treating Bisichi as a subsidiary, Dragon Retail Properties
Limited is also a subsidiary for accounting purposes, as LAP and
Bisichi each own 50% of that joint venture business.
JOINT VENTURES
Investments in joint ventures, being those entities over whose
activities the Group has joint control, as established by contractual
agreement, include the appropriate share of the results and net
assets of those undertakings.
Loans to joint ventures are classified as non-current assets when
they are not expected to be received in the normal working capital
cycle.
38 London & Associated Properties PLC 2017
FINANCIAL STATEMENTS Group accounting policies
FOREIGN CURRENCIES
Monetary assets and liabilities are translated at year end exchange
rates and the resulting exchange rate differences are included in the
consolidated income statement within the results of operating
activities if arising from trading activities, including inter-company
trading balances and within finance cost / income if arising from
financing.
For consolidation purposes, income and expense items are included
in the consolidated income statement at average rates, and assets
and liabilities are translated at year end exchange rates. Translation
differences arising on consolidation are recognised in other
comprehensive income. Foreign exchange differences on
intercompany loans are recorded in other comprehensive income
when the loans are not considered trading balances and are not
expected to be repaid in the foreseeable future. Where foreign
operations are sold or closed, the cumulative exchange differences
attributable to that foreign operation are recognised in the
consolidated income statement when the gain or loss on disposal is
recognised.
Transactions in foreign currencies are translated at the exchange rate
ruling on transaction date.
FINANCIAL INSTRUMENTS
Investments
Held to maturity investments are stated at amortised cost using the
effective interest rate method.
Investments held for trading are included in current assets at fair
value. For listed investments, fair value is the bid market listed value
at the balance sheet date. Realised and unrealised gains or losses
arising from changes in fair value are included in the income
statement of the period in which they arise.
Trade and other receivables
Trade and other receivables are recognised initially at fair value. A
provision for impairment of trade receivables is made when there is
evidence that the Group will not be able to collect all amounts due.
Trade receivables do not carry any interest, as any interest that would
be recognised from discounting future cash payments over the short
period is not considered to be material.
Trade and other payables
Trade and other payables are non-interest bearing and are stated at
their nominal value, as the interest that would be recognised from
discounting future cash payments over the short payment period is
not considered to be material.
Bank loans and overdrafts
Bank loans and overdrafts are included as financial liabilities on the
Group balance sheet net of the unamortised discount and costs of
issue. The cost of issue is recognised in the Group income Statement
over the life of the bank loan. Interest payable on those facilities is
expensed as a finance cost in the period to which it relates.
Debenture loans
The debenture loans are included as a financial liability on the
balance sheet net of the unamortised costs on issue. The cost of
issue is recognised in the Group income statement over the life of
the debenture. Interest payable to debenture holders is expensed in
the period to which it relates.
Finance lease liabilities
Finance lease liabilities arise for those investment properties held
under a leasehold interest and accounted for as investment property.
The liability is calculated as the present value of the minimum lease
payments, reducing in subsequent reporting periods by the
apportionment of payments to the lessor. Lease payments are
allocated between the liability and finance charges so as to achieve a
constant financing rate. Contingent rents payable, such as rent
reviews or those related to rental income, are charged as an expense
in the period in which they are incurred.
Interest rate derivatives
The Group uses derivative financial instruments to hedge the
interest rate risk associated with the financing of the Group’s
business. No trading in such financial instruments is undertaken. At
each reporting date, these interest rate derivatives are recognised at
their fair value to the business, being the Net Present Value of the
difference between the hedged rate of interest and the market rate
of interest for the remaining period of the hedge.
Ordinary shares
Shares are classified as equity when there is no obligation to transfer
cash or other assets. Incremental costs directly attributable to the
issue of new shares are shown in equity as a deduction, net of tax,
from the proceeds.
Treasury shares
When the Group’s own equity instruments are repurchased,
consideration paid is deducted from equity as treasury shares until
they are cancelled. When such shares are subsequently sold or
reissued, any consideration received is included in equity.
INVESTMENT PROPERTIES
Valuation
Investment properties are those that are held either to earn rental
income or for capital appreciation or both, including those that are
undergoing redevelopment. They are reported on the Group balance
sheet at fair value, being the amount for which an investment
property could be exchanged between knowledgeable and willing
parties in an arm’s length transaction. The directors’ property
valuation is at fair value.
The external valuation of properties is undertaken by independent
valuers who hold recognised and relevant professional qualifications
and have recent experience in the locations and categories of
properties being valued. Surpluses or deficits resulting from changes
in the fair value of investment property are reported in the Group
income statement in the period in which they arise.
Capital expenditure
Investment properties are measured initially at cost, including related
transaction costs. Additions to capital expenditure, being costs of a
capital nature, directly attributable to the redevelopment or
refurbishment of an investment property, up to the point of it being
completed for its intended use, are capitalised in the carrying value
of that property. The redevelopment of an existing investment
property will remain an investment property measured at fair value
and is not reclassified. Capitalised interest is calculated with
reference to the actual rate payable on borrowings for development
purposes, or for that part of the development costs financed out of
borrowings the capitalised interest is calculated on the basis of the
average rate of interest paid on the relevant debt outstanding.
London & Associated Properties PLC 2017 39
FINANCIAL STATEMENTS Group accounting policies
Disposal
The disposal of investment properties is recorded on completion of
the contract. On disposal, any gain or loss is calculated as the difference
between the net disposal proceeds and the valuation at the last year
end plus subsequent capitalised expenditure in the period.
Depreciation and amortisation
In applying the fair value model to the measurement of investment
properties, depreciation and amortisation are not provided in respect
of investment properties.
OTHER ASSETS AND DEPRECIATION
The cost, less estimated residual value, of other property, plant and
equipment is written off on a straight–line basis over the asset’s
expected useful life. Residual values and useful lives are reviewed,
and adjusted if appropriate, at each balance sheet date. Changes to
the estimated residual values or useful lives are accounted for
prospectively. The depreciation rates generally applied are:
Motor vehicles
Office equipment
25–33 per cent per annum
10–33 per cent per annum
ASSETS HELD FOR SALE
Non-current assets, or disposal groups comprising assets and
liabilities, are classified as held-for-sale if it is highly probable that
they will be recovered primarily through sale rather through
continuing use. Such assets, or disposal groups, are generally
measured at the lower of their carrying amount and fair value less
costs of sale. Any impairment loss on a disposal group is allocated
first to goodwill and then to the remaining assets and liabilities on a
pro rata basis, except that no loss is allocated to inventories, financial
assets, deferred tax assets, employee benefit assets, or investment
property which continues to be measured in accordance with the
Group’s other accounting policies. Impairment losses on initial
classification as assets held-for-sale and subsequent gains and losses
on remeasurement are recognised in profit or loss. Once classified as
held-for-sale, intangible assets and property, plant and equipment
are no longer amortised or depreciated, and any equity-accounted
investment is no longer equity accounted.
AVAILABLE FOR SALE ASSETS
Financial assets available for sale are measured at fair value. Any
changes in fair value above cost are recognised in other
comprehensive income and accumulated in the available-for-sale
reserve. For any changes in fair value below cost a provision for
impairment is recognised in the profit or loss account.
Other investments classified as non-current available for sale investments
comprise shares in listed companies and are carried at fair value.
INCOME TAXES
The charge for current taxation is based on the results for the year as
adjusted for disallowed or non–assessable items. Tax payable upon
realisation of revaluation gains recognised in prior periods is recorded
as a current tax charge with a release of the associated deferred tax.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities in
the financial statements and the corresponding tax bases used in the
tax computations and is recorded using the balance sheet liability
method. Deferred tax liabilities are generally recognised for all taxable
temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available against
which deductible temporary differences can be utilised. In respect of
40 London & Associated Properties PLC 2017
the deferred tax on the revaluation surplus, this is calculated on the
basis of the chargeable gains that would crystallise on the sale of the
investment portfolio as at the reporting date. The calculation takes
account of indexation on the historic cost of properties and any available
capital losses. Deferred tax is calculated at the tax rates that are
expected to apply in the period when the liability is settled or the
asset is realised. Deferred tax is charged or credited in the Group
income statement, except when it relates to items charged or
credited directly to equity, in which case it is also dealt with in equity.
DIVIDENDS
Dividends payable on the ordinary share capital are recognised as a
liability in the period in which they are approved.
CASH AND CASH EQUIVALENTS
Cash comprises cash in hand and on-demand deposits. Cash and
cash equivalents comprises short-term, highly liquid investments that
are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value and original
maturities of three months or less. The cash and cash equivalents
shown in the cashflow statement are stated net of bank overdrafts
that are repayable on demand as per IAS 7. This includes the
structured trade finance facility held in South Africa as detailed in
Note 21. These facilities are considered to form an integral part of
the treasury management of the Group and can fluctuate from
positive to negative balances during the period.
BISICHI MINING PLC
Mining revenue
Revenue is recognised when the customer has a legally binding
obligation to settle under the terms of the contract and has assumed
all significant risks and rewards of ownership.
Revenue is only recognised on individual sales of coal when all of the
significant risks and rewards of ownership have been transferred
to a third party. Export revenue is generally recognised when the
product is delivered to the export terminal location specified by the
customer, at which point the customer assumes risks and rewards
under the contract. Domestic coal revenues are generally recognised
on collection by the customer from the mine when loaded into
transport, where the customer pays the transportation costs.
Mining costs
Expenditure is recognised in respect of goods and services received.
Where coal is purchased from third parties at point of extraction the
expenditure is only recognised when the coal is extracted and all of
the significant risks and rewards of ownership have been transferred.
Mining reserves, plant and equipment
The cost of property, plant and equipment comprises its purchase
price and any costs directly attributable to bringing the asset to the
location and condition necessary for it to be capable of operating in
accordance with agreed specifications. Freehold land is not
depreciated. Other property, plant and equipment is stated at
historical cost less accumulated depreciation. The cost recognised
includes the recognition of any decommissioning assets related to
property, plant and equipment.
Heavy surface mining and other plant and equipment is depreciated at
varying rates depending upon its expected usage. The depreciation
rates generally applied are between 5-10 per cent per annum, but
limited to the shorter of its useful life or the life of the mine.
FINANCIAL STATEMENTS Group accounting policies
Post production stripping
In surface mining operations, the Group may find it necessary to
remove waste materials to gain access to coal reserves prior to and
after production commences. Prior to production commencing,
stripping costs are capitalised until the point where the overburden
has been removed and access to the coal seam commences.
Subsequent to production, waste stripping continues as part of the
extraction process as a run of mine activity. There are two benefits
accruing to the Group from stripping activity during the production
phase: extraction of coal that can be used to produce inventory and
improved access to further quantities of material that will be mined
in future periods. Economic coal extracted is accounted for as
inventory. The production stripping costs relating to improved access
to further quantities in future periods are capitalised as a stripping
activity asset, if and only if, all of the following are met:
• it is probable that the future economic benefit associated with the
stripping activity will flow to the Group;
• the Group can identify the component of the ore body for which
access has been improved; and
• the costs relating to the stripping activity associated with that
component or components can be measured reliably.
In determining the relevant component of the coal reserve for which
access is improved, the Group componentises its mine into
geographically distinct sections or phases to which the stripping
activities being undertaken within that component are allocated.
Such phases are determined based on assessment of factors such as
geology and mine planning.
The Group depreciates deferred costs capitalised as stripping assets
on a unit of production method, with reference to the tons mined
and reserve of the relevant ore body component or phase.
SEGMENTAL REPORTING
For management reporting purposes, the Group is organised into
business segments distinguishable by economic activity. The Group’s
business segments are LAP operations, Bisichi operations and
Dragon operations. These business segments are subject to risks and
returns that are different from those of other business segments and
are the primary basis on which the Group reports its segmental
information. This is consistent with the way the Group is managed
and with the format of the Group’s internal financial reporting.
Significant revenue from transactions with any individual customer,
which makes up 10 per cent or more of the total revenue of the
Group, is separately disclosed within each segment. All coal exports
are sales to coal traders at Richard Bay’s terminal in South Africa with
the risks and rewards passing to the coal trader at the terminal.
Whilst the coal traders will ultimately sell the coal on the
international markets the Group has no visibility over the ultimate
destination of the coal. Accordingly, the export sales are recorded as
South Africa revenue.
Other non–current assets, comprising motor vehicles and office
equipment, are depreciated at a rate of between 10% and 33% per
annum which is calculated to write off the cost, less estimated
residual value of the assets, on a straight line basis over their
expected useful lives.
Mine inventories
Inventories are stated at the lower of cost and net realisable value.
Cost includes materials, direct labour and overheads relevant to the
stage of production. Cost is determined using the weighted average
method. Net realisable value is based on estimated selling price less
all further costs to completion and all relevant marketing, selling and
distribution costs.
Mine provisions
Provisions are recognised when the Group has a present obligation
as a result of a past event which it is probable will result in an
outflow of economic benefits that can be reliably estimated.
A provision for rehabilitation of the mine is initially recorded at
present value and the discounting effect is unwound over time as a
finance cost. Changes to the provision as a result of changes in
estimates are recorded as an increase/decrease in the provision and
associated decommissioning asset. The decommissioning asset is
depreciated in line with the Group’s depreciation policy over the life
of mine. The provision includes the restoration of the underground,
opencast, surface operations and de-commissioning of plant and
equipment. The timing and final cost of the rehabilitation is uncertain
and will depend on the duration of the mine life and the quantities
of coal extracted from the reserves.
Mine impairment
Whenever events or changes in circumstance indicate that the
carrying amount of an asset may not be recoverable that asset is
reviewed for impairment. This includes mining reserves, plant and
equipment and net investments in joint ventures. A review involves
determining whether the carrying amounts are in excess of the
recoverable amounts.
An asset’s recoverable amount is determined as the higher of its fair
value less costs of disposal and its value in use. Such reviews are
undertaken on an asset-by-asset basis, except where assets do not
generate cash flows independent of other assets, in which case the
review is undertaken on a company or Group level.
If the carrying amount of an asset exceeds its recoverable amount an
asset’s carrying value is written down to its estimated recoverable
amount (being the higher of the fair value less cost to sell and value
in use). Any change in carrying value is recognised in the
comprehensive income statement.
Mine reserves and development cost
The purpose of mine development is to establish secure working
conditions and infrastructure to allow the safe and efficient
extraction of recoverable reserves. Depreciation on mine
development is not charged until production commences or the
assets are put to use. On commencement of full commercial
production, depreciation is charged over the life of the associated
mine reserves extractable using the asset on a unit of production
basis. The unit of production calculation is based on tonnes mined as
a ratio to proven and probable reserves and also includes future
forecast capital expenditure. The cost recognised includes the
recognition of any decommissioning assets related to mine
development.
London & Associated Properties PLC 2017 41
FINANCIAL STATEMENTS
Notes to the financial statements
for the year ended 31 December 2017
1. RESULTS FOR THE YEAR AND SEGMENTAL ANALYSIS
Operating Segments are based on the internal reporting and operational management of the Group. LAP is focused primarily on property activities
(which generate trading income), but it also holds and manages investments. IFRS 10 requires the Group to treat Bisichi as a subsidiary and therefore
it is consolidated, rather than being included in the accounts as an associate using the equity method. The Group has also consolidated Dragon, a
company which the Company jointly controls with Bisichi; Bisichi is a coal mining company with operations in South Africa and also holds investment
property in the United Kingdom and derives income from property rentals. Dragon is a property investment company and derives its income from
property rentals. These operating segments (LAP, Bisichi and Dragon) are each viewed separately and have been so reported below.
Business segments
BUSINESS ANALYSIS
Rental income
Management income from third party properties
Mining
Group Revenue
Direct property costs
Direct mining costs
Overheads
Exchange losses
Depreciation
Operating profit
Finance income
Finance expenses
Debenture break costs
Result before valuation movements
Other segment items
Net increase/(decrease) on revaluation of investment properties
Write off investment in joint venture
Adjustment to interest rate derivative
Revaluation and other movements
Profit/(loss) for the year before taxation
Segment assets
- Non-current assets - property
- Non-current assets - plant & equipment
- Cash & cash equivalents
- Non-current assets - other
- Current assets - others
Total assets excluding investment in joint ventures and assets held for sale
Segment liabilities
Borrowings
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Assets held for sale
Net assets as per balance sheet
Major customers
Customer A
Customer B
These customers are for mining revenue in South Africa.
GEOGRAPHIC ANALYSIS
Revenue
Operating profit
Non-current assets excluding investments
Total net assets
Capital expenditure
42 London & Associated Properties PLC 2017
LAP
£'000
6,825
542
–
7,367
(926)
–
(2,869)
–
(13)
3,559
38
(3,713)
(14)
(130)
9,386
–
358
9,744
9,614
65,231
116
2,109
1,748
2,715
71,919
(57,571)
(5,588)
(4,806)
(67,965)
3,954
36,441
BISICHI
£'000
1,112
–
36,334
37,446
(152)
(25,664)
(5,589)
(256)
(1,790)
3,995
67
(526)
–
3,536
(13)
(1,827)
–
(1,840)
1,696
13,397
8,613
5,327
51
6,285
33,673
(7,160)
(7,556)
(3,986)
(18,702)
14,971
–
–
–
27,528
7,226
UNITED
KINGDOM
£'000
8,692
4,645
81,383
52,452
30
DRAGON
£'000
166
–
–
166
(1)
–
(164)
–
(1)
–
–
(29)
–
(29)
–
–
(3)
(3)
(32)
2,630
6
92
–
30
2,758
(1,218)
(123)
(73)
(1,414)
1,344
–
–
–
SOUTH
AFRICA
£'000
36,287
2,909
8,610
4,258
1,741
2017
TOTAL
£'000
8,103
542
36,334
44,979
(1,079)
(25,664)
(8,622)
(256)
(1,804)
7,554
105
(4,268)
(14)
3,377
9,373
(1,827)
355
7,901
11,278
81,258
8,735
7,528
1,799
9,030
108,350
(65,949)
(13,267)
(8,865)
(88,081)
20,269
36,441
56,710
27,528
7,226
2017
TOTAL
£'000
44,979
7,554
89,993
56,710
1,771
FINANCIAL STATEMENTS Notes to the financial statements
1. RESULTS FOR THE YEAR AND SEGMENTAL ANALYSIS CONTINUED
BUSINESS ANALYSIS
Rental income
Management income from third party properties
Mining
Group Revenue
Direct property costs
Direct mining costs
Overheads
Exchange gains
Depreciation
Operating profit before listed investments held for trading
Listed investments held for trading
Operating profit
Finance income
Finance expenses
Result before valuation movements
Other segment items
Net increase/(decrease) on revaluation of investment properties
Increase in value of other investments
Net increase on revaluation of investments held for trading
Adjustment to interest rate derivative
Revaluation and other movements
(Loss)/profit for the year before taxation
Segment assets
- Non – current assets – property
- Non – current assets – plant and equipment
- Cash and cash equivalents
- Non – current assets – other
- Non – current assets – deferred tax asset
- Current assets – others
Total assets excluding investment in joint ventures and assets held for sale
Segment liabilities
Borrowings
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Investment in joint ventures non segmental
Net assets as per balance sheet
Major customer
Customer A
This customer is for mining revenue in South Africa.
GEOGRAPHIC ANALYSIS
Revenue
Operating profit/(loss)
Non–current assets excluding investments
Total net assets
Capital expenditure
LAP
£'000
6,241
501
–
6,742
(1,168)
–
(2,926)
–
(25)
2,623
2
2,625
11
(3,706)
(1,070)
125
–
1
(206)
(80)
(1,150)
93,791
112
3,706
1,874
1,134
1,853
102,470
(58,068)
(6,074)
(5,379)
(69,521)
32,949
–
–
BISICHI
£'000
1,060
–
21,731
22,791
(187)
(16,184)
(4,903)
449
(1,785)
181
–
181
132
(554)
(241)
445
12
–
–
457
216
13,426
8,520
2,444
32
–
7,745
32,167
(9,234)
(6,811)
(3,665)
(19,710)
12,457
–
–
DRAGON
£'000
171
–
–
171
5
–
(128)
–
(8)
40
–
40
1
(32)
9
(38)
–
–
(11)
(49)
(40)
2,630
21
115
–
–
20
2,786
(1,207)
(78)
(81)
(1,366)
1,420
–
–
2016
TOTAL
£'000
7,472
501
21,731
29,704
(1,350)
(16,184)
(7,957)
449
(1,818)
2,844
2
2,846
144
(4,292)
(1,302)
532
12
1
(217)
328
(974)
109,847
8,653
6,265
1,906
1,134
9,618
137,423
(68,509)
(12,963)
(9,125)
(90,597)
46,826
1,805
48,631
–
14,543
–
14,543
UNITED
KINGDOM
£'000
8,025
3,441
111,117
43,916
164
SOUTH
AFRICA
£'000
21,679
(595)
8,517
4,715
2,858
2016
TOTAL
£'000
29,704
2,846
119,634
48,631
3,022
Group revenue is external to the Group and the directors consider that inter segmental revenues are not material. Revenue includes
contingent rents of £0.7 million (2016: £0.2 million).
London & Associated Properties PLC 2017 43
FINANCIAL STATEMENTS Notes to the financial statements
2. PROFIT/(LOSS) BEFORE TAXATION
Profit/(loss) before taxation is stated after charging/(crediting):
Staff costs (see Note 29)
Depreciation on tangible fixed assets - owned assets
Operating lease rentals - land and buildings
Exchange loss/(gain)
Profit on disposal of motor vehicles and office equipment
Amounts payable to the auditor in respect of both audit and non-audit services
Audit services
Statutory - Company and consolidation
Subsidiaries - audited by RSM
Subsidiaries - audited by other auditors
Further assurance services
Other services
Staff costs are included in overheads.
3. LISTED INVESTMENTS HELD FOR TRADING
Dividends receivable
Net profit from listed investments
4. DIRECTORS’ EMOLUMENTS
Emoluments
Defined contribution pension scheme contributions
Sir Michael Heller received £75,000 (2016: £75,000) as a Director of Bisichi Mining PLC.
Details of directors’ emoluments and share options are set out in the remuneration report.
5. FINANCE INCOME AND EXPENSES
Finance income
Finance expenses
Interest on bank loans and overdrafts
Unwinding of discount (Bisichi)
Other loans
Interest on derivatives
Interest on obligations under finance leases
Total finance expenses
2017
£'000
8,113
1,804
411
256
(3)
83
17
51
4
5
160
2017
£'000
–
–
2017
£'000
894
27
921
2017
£'000
105
(2,223)
(92)
(1,414)
(337)
(202)
(4,268)
(4,163)
2016
£'000
7,173
1,818
442
(449)
(32)
88
20
50
4
32
194
2016
£'000
2
2
2016
£'000
988
45
1,033
2016
£'000
144
(2,243)
(78)
(1,420)
(302)
(249)
(4,292)
(4,148)
44 London & Associated Properties PLC 2017
FINANCIAL STATEMENTS Notes to the financial statements
6. INCOME TAX
Current tax
Corporation tax on profit of the period
Corporation tax on profit/(loss) of previous periods
Total current tax
Deferred tax
Origination of timing differences
Revaluation of investment properties
Accelerated capital allowances
Fair value of interest derivatives
Adjustment in respect of prior years
Total deferred tax (Notes 24 and 25)
Tax on profit on ordinary activities
2017
£'000
369
(5)
364
(35)
2,348
235
68
2
2,618
2,982
2016
£'000
73
–
73
874
472
(48)
(40)
(156)
1,102
1,175
Factors affecting tax charge for the year
The corporation tax assessed for the year is different from that at the effective rate of corporation tax in the United Kingdom of 19.25 per
cent (2016: 20 per cent). The differences are explained below:
Profit/(loss) for the year before taxation
Taxation at 19.25 per cent (2016: 20 per cent)
Effects of:
Capital gains
Other differences
Adjustment in respect of prior years
Deferred tax rate adjustment
Income tax charge for the year
Analysis of United Kingdom and overseas tax:
United Kingdom tax included in above:
Corporation tax
Adjustment in respect of prior years
Current tax
Deferred tax
Overseas tax included above:
Corporation tax
Current tax
Deferred tax
Adjustment in respect of prior years
Deferred tax
2017
£'000
11,278
2,171
1,792
(785)
(3)
(193)
2,982
2017
£'000
233
(5)
228
2,219
2,447
2017
£'000
136
136
397
2
399
535
2016
£'000
(974)
(195)
800
506
(157)
221
1,175
2016
£'000
13
–
13
1,241
1,254
2016
£'000
60
60
(139)
–
(139)
(79)
Factors that may affect future tax charges:
Based on current capital expenditure plans, the Group expects to continue to be able to claim capital allowances in excess of depreciation in
future years, but at a slightly lower level than in the current year.
A deferred tax provision has been made for gains on revaluing investment properties.
The Finance Bill 2016 was substantively enacted on 7 September 2016. This includes a reduction in the rate of Corporation tax from 19%
effective 1 April 2017 to 17% from 1 April 2020.
The Finance (no. 2) Act 2017 was substantively enacted on 16 November 2017. This includes a restriction on the utilisation of brought
forward tax losses and corporate interest in certain circumstances effective from 1 April 2017.
London & Associated Properties PLC 2017 45
FINANCIAL STATEMENTS Notes to the financial statements
7. DISCONTINUED OPERATIONS
As part of the Group's strategy to focus on core assets, the Group disposed of King Edward Court, Windsor in 2013. The profits and losses
arising from this disposal were classified as discontinued operations. Contracts for the sale of King Edward Court had been exchanged in
2013 and completion took place in January 2014. Following the settlement of a dispute additional proceeds of £414,000 were received by
the Group in 2016.
8. DIVIDEND
Dividends paid during the year relating to the prior period
Dividends to be paid:
Proposed final dividend for the year
Proposed special dividend for the year
9. PROFIT/(LOSS) PER SHARE AND NET ASSETS PER SHARE
Profit/(loss) per share has been calculated as follows:
2017
2016
PER SHARE
0.165p
0.175p
0.125p
£'000
141
149
107
PER SHARE
0.16p
0.165p
–
£'000
136
141
–
Profit/(loss) for the year for the purposes of basic and diluted profit/(loss) per share (£'000)
Weighted average number of ordinary shares in issue for the purpose of basic profit/(loss) per share ('000)
Basic profit/(loss) per share
Weighted average number of ordinary shares in issue for the purpose of diluted profit/(loss) per share
('000)
Fully diluted profit/(loss) per share
2017
7,686
85,322
9.01p
85,322
2016
(2,357)
85,107
(2.77)p
85,107
9.01p
(2.77)p
Weighted average number of shares in issue is calculated after excluding treasury shares of 221,061 (2016: 221,061).
2017
45,854
85,322
53.74p
45,854
85,322
53.74p
2016
38,242
85,322
44.83p
38,242
85,322
44.83p
TOTAL
£'000
109,847
(36,441)
13
(1,534)
9,373
81,258
78,025
3,233
81,258
81,258
109,847
FREEHOLD
£'000
88,585
(36,441)
13
–
10,268
62,425
LEASEHOLD
OVER 50 YEARS
£'000
19,620
–
–
(1,839)
(925)
16,856
LEASEHOLD
UNDER 50
YEARS
£'000
1,642
–
–
305
30
1,977
62,425
–
62,425
62,425
88,585
14,570
2,286
16,856
16,856
19,620
1,030
947
1,977
1,977
1,642
Net assets per share have been calculated as follows:
Net assets (£'000)
Shares in issue ('000)
Basic net assets per share
Net assets diluted (£'000)
Shares in issue ('000)
Diluted net assets per share
10. INVESTMENT PROPERTIES
Cost or valuation at 1 January 2017
Transfer to assets held for sale (Note 14)
Additions in year
(Decrease)/increase in present value of head leases
Increase/(decrease) on revaluation
At 31 December 2017
Representing assets stated at:
Valuation
Present value of head leases
At 31 December 2017
At 31 December 2016
46 London & Associated Properties PLC 2017
FINANCIAL STATEMENTS Notes to the financial statements
10. INVESTMENT PROPERTIES CONTINUED
Cost or valuation at 1 January 2016
Additions in year
Decrease in present value of head leases
Increase/(decrease) on revaluation
At 31 December 2016
Representing assets stated at:
Valuation
Present value of head leases
At 31 December 2016
At 31 December 2015
TOTAL
£'000
109,172
160
(17)
532
109,847
105,080
4,767
109,847
109,847
109,172
FREEHOLD
£'000
86,468
160
–
1,957
88,585
LEASEHOLD
OVER 50 YEARS
£'000
21,060
–
(15)
(1,425)
19,620
88,585
–
88,585
88,585
86,468
15,495
4,125
19,620
19,620
21,060
LEASEHOLD
UNDER 50
YEARS
£'000
1,644
–
(2)
–
1,642
1,000
642
1,642
1,642
1,644
The leasehold and freehold properties, excluding the present value of head leases and directors' valuations, were valued as at 31 December
2017 by professional firms of chartered surveyors. The valuations were made at fair value. The directors' property valuations were made at
fair value.
Allsop LLP
Carter Towler
Directors' valuations
Add: present value of headleases
2017
£'000
62,955
13,245
1,825
78,025
3,233
81,258
2016
£'000
90,010
13,245
1,825
105,080
4,767
109,847
The historical cost of investment properties, including total capitalised interest of £1,161,000 (2016: £1,161,000) was as follows:
Cost at 1 January
Transfer to assets held for sale (Note 14)
Additions
Cost at 31 December
2017
LEASEHOLD
OVER 50
YEARS
£'000
17,653
–
–
17,653
LEASEHOLD
UNDER 50
YEARS
£'000
1,939
–
–
1,939
FREEHOLD
£'000
72,711
(5,022)
13
67,702
2016
LEASEHOLD
OVER 50
YEARS
£'000
17,653
–
–
17,653
LEASEHOLD
UNDER 50
YEARS
£'000
1,939
–
–
1,939
FREEHOLD
£'000
72,551
–
160
72,711
Each year external valuers are appointed by the executive directors on behalf of the Board. The valuers are selected based upon their
knowledge, independence and reputation for valuing assets such as those held by the Group.
Valuations are performed annually and are performed consistently across all properties in the Group's portfolio. At each reporting date
appropriately qualified employees of the Group verify all significant inputs and review the computational outputs. Valuers submit their report
to the Board on the outcome of each valuation.
Valuations take into account tenure, lease terms and structural condition. The inputs underlying the valuations include market rent or
business profitability, likely incentives offered to tenants, forecast growth rates, yields, EBITDA, discount rates, construction costs including
any specific site costs (for example section 106), professional fees, developer's profit including contingencies, planning and construction
timelines, lease regear costs, planning risk and sales prices based on known market transactions for similar properties to those being valued.
Valuations are based on what is determined to be the highest and best use. When considering the highest and best use the valuer will
consider, on a property by property basis, its actual and potential uses which are physically, legally and financially viable. Where the highest
and best use differs from the existing use, the valuer will consider the cost and likelihood of achieving and implementing this change in
arriving at the valuation.
There are often restrictions on Freehold and Leasehold property which could have a material impact on the realisation of these assets. The
most significant of these occur when planning permission or lease extension and renegotiation of use are required or when a credit facility is
in place. These restrictions are factored into the property's valuation by the external valuer.
London & Associated Properties PLC 2017 47
financial statements Notes to the financial statements
10. INVESTMENT PROPERTIES CONTINUED
The methods of fair value measurement are classified into a hierarchy based on the reliability of the information used to determine the
valuation, as follows:
Level 1: valuation based on inputs on quoted market prices in active markets.
Level 2: valuation based on inputs other than quoted prices included within level 1 that maximise the use of observable data directly or from
market prices or indirectly derived from market prices.
Level 3: where one or more significant inputs to valuations are not based on observable market data.
class Of PROPeRtY
leVel 3
Freehold – external valuation
caRRYinG /
faiR ValUe
2017
£'000
60,600
CARRYING/
FAIR VALUE
2016
£'000
ValUatiOn
tecHniQUe
86,760 Income
capitalisation
KeY
UnOBseRVaBle
inPUts
Estimated Rental Value
Per sq ft p.a
Equivalent Yield
Leasehold over 50 years –
external valuation
14,570
15,495 Income
capitalisation
Estimated Rental Value
Per sq ft p.a
RanGe
(WEIGHTED
AVERAGE)
2017
£5 – £39
(£19)
4.9% – 12.9%
(8.4%)
£5 – £10
(£9)
Leasehold under 50 years –
external valuation
1,030
1,000 Income
capitalisation
Freehold – Directors' valuation
1,825
1,825 Income
capitalisation
Equivalent Yield
5.8% – 17.6%
Estimated Rental Value
Per sq ft p.a
Equivalent Yield
Estimated Rental Value
Per sq ft p.a
Equivalent Yield
(9%)
£4 – £5
(£5)
25.4% – 25.8%
(25.5%)
£5 – £5
(£5)
6.1% – 6.1%
(6.1%)
RANGE
(WEIGHTED
AVERAGE)
2016
£5 – £37
(£19)
5% – 14%
(8%)
£5 – £11
(£9)
7% – 18%
(11%)
£3 – £5
(£4)
18% – 23%
(19%)
£5 – £5
(£5)
6% – 6%
(6%)
At 31 December
78,025
105,080
There are interrelationships between all these inputs as they are determined by market conditions. The existence of an increase in more than
one input would be to magnify the input on the valuation. The impact on the valuation will be mitigated by the interrelationship of two inputs
in opposite directions, for example, an increase in rent may be offset by an increase in yield.
The table below illustrates the impact of changes in key unobservable inputs on the carrying / fair value of the Group's properties.
ESTIMATED RENTAL
ValUe
10% INCREASE OR
(DECREASE)
EQUIVALENT YIELD
25 BASIS POINT
CONTRACTION
OR (EXPANSION)
2016
£'000
2017
£'000
2016
£'000
6,055/(6,055) 8,671/(8,671) 2,095/(1,956) 3,585/(3,298)
394/(375)
1,457/(1,457) 1,545/(1,545)
13/(13)
100/(100)
78/(72)
183/(183)
355/(338)
10/(10)
78/(71)
103/(103)
183/(183)
2017
£'000
Freehold – external valuation
Leasehold over 50 years – external valuation
Leasehold under 50 years – external valuation
Freehold – Directors' valuation
48 London & Associated Properties PLC 2017
FINANCIAL STATEMENTS Notes to the financial statements
11. MINING RESERVES, PLANT AND EQUIPMENT
Cost at 1 January 2017
Exchange adjustment
Additions
Disposals
At 31 December 2017
Accumulated depreciation at 1 January 2017
Exchange adjustment
Charge for the year
Disposals in year
Accumulated depreciation at 31 December 2017
Net book value at 31 December 2017
Cost at 1 January 2016
Exchange adjustment
Additions
Disposals
Cost at 31 December 2016
Accumulated depreciation at 1 January 2016
Exchange adjustment
Charge for the year
Disposals
Accumulated depreciation at 31 December 2016
Net book value at 31 December 2016
12. INVESTMENT IN JOINT VENTURE
Shares in joint venture:
At 1 January
Write off of investment
Exchange adjustment
At 31 December
TOTAL
£'000
25,817
474
1,758
(53)
27,996
17,164
332
1,804
(39)
19,261
8,735
17,188
6,273
2,862
(506)
25,817
11,636
4,202
1,818
(492)
17,164
8,653
MINING
RESERVES
£'000
1,344
22
–
–
1,366
MINING
EQUIPMENT
£'000
23,724
447
1,731
–
25,902
OFFICE
EQUIPMENT
AND MOTOR
VEHICLES
£'000
749
5
27
(53)
728
1,287
21
1
(1)
1,308
58
995
349
–
–
1,344
949
336
2
–
1,287
57
15,370
308
1,763
–
17,441
8,461
15,453
5,858
2,814
(401)
23,724
10,201
3,824
1,746
(401)
15,370
8,354
2017
£'000
455
(447)
(8)
–
507
3
40
(38)
512
216
740
66
48
(105)
749
486
42
70
(91)
507
242
2016
£'000
325
–
130
455
At 31 December 2017 the joint venture had non-current assets of £nil (2016: £1,346,000), current assets of £nil (2016: £3,000) and current
liabilities of £nil (2016: £1,349,000).
Bisichi owned 49% of the issued share capital of Ezimbokodweni (an unlisted coal production company in South Africa). The Directors of
Bisichi have now concluded that the joint venture (which has not traded to date) is unlikely to generate income in the foreseeable future. For
that reason, the investment and the loan (Note 13) have been written off.
13. LOAN TO JOINT VENTURE
Loan to Ezimbokodweni Mining (Pty) Limited
At 1 January
Exchange adjustment
Additions - interest
Write-off
At 31 December
14. ASSETS HELD FOR SALE
At 1 January
Transfer from investment property (Note 10)
Disposal
At 31 December
2017
JOINT
VENTURES
ASSETS
£'000
2016
JOINT
VENTURES
ASSETS
£'000
1,350
(16)
46
(1,380)
–
2017
£'000
–
36,441
–
36,441
900
336
114
–
1,350
2016
£'000
2,335
–
(2,335)
–
In March 2018 contracts were exchanged for the sale of both Brixton markets for a combined price of £37.25 million. The properties were held at a
valuation of £24.52 million at 31 December 2016 and a revaluation gain of £11.92 million is recognised in note 10 prior to the transfer of the
property to assets held for sale. Following the Market Row completion on 23 April 2018, £15.9 million of bank loans related to those properties
have been repaid as required by the terms of the loan agreements. The Brixton Village completion was on 26 April 2018. As required under IFRS,
these properties have been reclassified from investment properties to assets held for sale, at fair value less costs to sell of £36.44 million. Related
loans are classified as non-current in Note 23.
London & Associated Properties PLC 2017 49
FINANCIAL STATEMENTS Notes to the financial statements
15. SUBSIDIARY COMPANIES
In accordance with Section 409 of the Companies Act 2006 a full list of subsidiaries, the principal activity, the country of incorporation and
the percentage of equity owned, as at 31 December 2017 is disclosed below:
ENTITY
Analytical Investments Limited
Analytical Portfolios Limited
Analytical Properties Holdings Limited
Analytical Properties Limited
Analytical Ventures Limited
24 Bruton Place Limited
24 BPL (Harrogate) Limited
24 BPL (Harrogate ) Two Limited
Brixton Village Limited
Market Row Limited
Newincco 1243 Limited
Newincco 1244 Limited
Newincco 1245 Limited
ACTIVITY
Dormant
Dormant
Property
Property
Property
Dormant
Investment
Investment
Property
Property
Property
Property
Property
Management
Services
Property
Newincco 1299 Limited
Property
Newincco 1300 Limited
Property
LAP Ocean Holdings Limited
Property
LAP Ocean Two Limited
Dormant
London & Associated Limited
Dormant
London & Associated (Rugeley) Limited
Dormant
London & Associated Securities Limited
London & Associated Management Services Limited Property
PERCENTAGE
OF SHARE
CAPITAL
100%
100%
100%
100%
100%
100%
88%
100%
100%
100%
100%
100%
100%
COUNTRY OF
INCORPORATION
REGISTERED ADDRESS
24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place, London, W1J 6NE England and Wales
100%
100%
100%
100%
100%
100%
100%
100%
24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place, London, W1J 6NE England and Wales
London & African Investments Limited
Orchard Chambers Residential Limited
Bisichi Mining PLC (Note D)
Mineral Products Limited (Note A)(Note D)
Bisichi (Properties) Limited (Note A)(Note D)
Bisichi Mining (Exploration) Limited (Note A)(Note
D)
Black Wattle Colliery (Pty) Limited (Note A)(Note D) Coal mining
100%
100%
41.52%
Management
Services
Dormant
Dormant
Coal mining
Share dealing 100%
100%
Property
100%
Holding
company
62.5%
Bisichi Coal Mining (Pty) Limited (Note A)(Note D)
Coal mining
100%
Dormant
Urban First (Northampton) Limited (Note A)(Note
D)
Bisichi Trustee Limited (Note A)(Note D)
Bisichi Mining Management Services Limited
(Note A) (Note D)
Ninghi Marketing Limited (Note A)(Note D)
Bisichi Northampton Limited (Note A)(Note D)
Amandla Ehtu Mineral Resource Development
(Pty) Limited (Note A)(Note D)
Black Wattle Klipfontein (Pty) Limited (Note A)(Note D) Coal mining
Dormant
Property
Dormant
Property
Dormant
100%
100%
100%
90.1%
100%
70%
62.5%
Dragon Retail Properties Limited (Note B)(Note
D)
Newincco 1338 Limited (Note C)
Property
50%
24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place, London, W1J 6NE England and Wales
Samora Machel Street, Bethal Road,
Middelburg, Mpumalanga, 1050
Samora Machel Street, Bethal Road,
Middelburg, Mpumalanga, 1050
24 Bruton Place, London, W1J 6NE England and Wales
South Africa
South Africa
24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place, London, W1J 6NE England and Wales
Samora Machel Street, Bethal Road,
Middelburg, Mpumalanga, 1050
Samora Machel Street, Bethal Road,
Middelburg, Mpumalanga, 1050
24 Bruton Place, London, W1J 6NE England and Wales
South Africa
South Africa
Property
100%
24 Bruton Place, London, W1J 6NE England and Wales
Details on the non–controlling interest in subsidiaries are shown under Note 27.
Note A: these companies are owned by Bisichi and the equity shareholdings disclosed relate to that company.
Note B: this entity is a joint venture owned 50% by LAP and 50% by Bisichi.
Note C: this company is owned by Dragon and the equity shareholdings disclosed relate to that company.
Note D: Bisichi and Dragon and their subsidiaries are included in the consolidated financial statements in accordance with IFRS 10.
50 London & Associated Properties PLC 2017
FINANCIAL STATEMENTS Notes to the financial statements
16. INVENTORIES
Coal
Washed
Mining production
Work in progress
Other
2017
£'000
301
286
227
14
828
17. HELD TO MATURITY INVESTMENTS AND OTHER INVESTMENTS
Held to maturity investments:
At 1 January
Repayments
At 31 December
2017
TOTAL
£'000
1,874
(126)
1,748
UNLISTED
SHARES
£'000
1
–
1
LOAN
STOCK
£'000
1,873
(126)
1,747
2016
TOTAL
£'000
1,995
(121)
1,874
UNLISTED
SHARES
£'000
1
–
1
2016
£'000
1,139
83
458
41
1,721
LOAN
STOCK
£'000
1,994
(121)
1,873
The Group owns a 3.17% (2016: 6.95%) interest in the equity and loans of HRGT Shopping Centres LP (HRGT), a limited partnership set up
in England to acquire and own 3 shopping centres in Dunfermline, Kings Lynn and Loughborough. 96.4% (2016: 92.10%) of the equity and
loans are owned by Oaktree Capital Management and 0.43% (2016: 0.95%) by Gooch Cunliffe Whale LLP. London & Associated
Management Services Limited has a management contract to manage the properties on behalf of HRGT.
Other investments:
Net book and market value of investments listed on overseas stock exchange
18. TRADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Prepayments and accrued income
The directors consider that the carrying amount of trade and other receivables approximates to their fair value.
19. INVESTMENTS AVAILABLE FOR SALE AND HELD FOR TRADING
Market bid value of the listed investment portfolio - available for sale
Market bid value of the listed investment portfolio - held for trading
Unrealised gain of market value over cost
Listed investment portfolio at cost
2017
£'000
51
2017
£'000
4,920
736
1,476
7,132
2017
£'000
1,050
19
129
940
2016
£'000
32
2016
£'000
4,701
1,010
1,350
7,061
2016
£'000
781
19
45
755
Investments are listed on the London Stock Exchange with the exception of £47,000 (2016: £60,000) listed outside Great Britain.
The directors have reviewed the individual investments for impairment and do not consider the investments which are below cost to be impaired.
20. TRADE AND OTHER PAYABLES
Trade payables
Other taxation and social security costs
Other payables
Accruals and deferred income
The directors consider that the carrying amount of trade and other payables approximates to their fair value.
2017
£'000
3,937
629
2,842
5,501
12,909
2016
£'000
3,618
739
2,815
5,770
12,942
London & Associated Properties PLC 2017 51
FINANCIAL STATEMENTS Notes to the financial statements
21. BORROWINGS
Other loans (Bisichi)
£1.25 million term bank loan (secured) repayable by 2020 (Dragon)*
£3.75 million first mortgage debenture stock 2018 at 11.6 per cent
Bank overdrafts (secured) (Bisichi)
Bank loan (secured)(Bisich)
£10 million first mortgage debenture stock 2022 at 8.109 per cent*
£5.876 million term bank loan (secured) repayable by 2019 (Bisichi)*
£34.897 million term bank loan (secured) repayable by 2019*
£10.105 million term bank loan (secured) repayable by 2019 at 9.5 per cent*
Borrowings analysis by origin:
United Kingdom
South Africa
2017
£'000
CURRENT
26
–
3,000
1,262
–
–
–
–
–
4,288
2017
£'000
NON-CURRENT
–
1,218
–
–
–
9,922
5,872
34,640
10,009
61,661
2016
£'000
CURRENT
24
–
750
3,334
–
–
–
–
–
4,108
2016
£'000
NON-CURRENT
–
1,207
3,000
–
66
9,905
5,810
34,468
9,945
64,401
2017
£'000
64,621
1,328
65,949
2016
£'000
65,085
3,424
68,509
* The £10 million debenture and bank loans are shown after deduction of un-amortised issue costs.
Interest payable on the term bank loans is variable being based upon the London inter–bank offered rate (LIBOR) plus margin.
In June 2017, the Group repaid early £0.75 million of the £5 million first mortgage debenture stock 2018, at an additional cost of £14,000.
First Mortgage Debenture Stocks August 2018 and 2022 and the Santander £34.897 million and Europa £10.105 million term bank loans
repayable in July 2019 are secured by way of a charge on specific freehold and leasehold properties which are included in the financial
statements at a value of £96.52 million. In addition, £0.12 million of cash deposits are charged as security to debenture stocks. The £34.897
million bank loan has an interest cost of 2 per cent above LIBOR. An interest rate swap and cap agreements are in place as detailed in Note
23. Santander bank loans of £12.8 million and Europa bank loans of £3.1m related to Brixton Markets sales are repayable on completion in
accordance with the terms of the loan agreements.
The Bisichi United Kingdom bank loans of £5.832 million (2016: £5.810 million) are secured by way of a first charge over the investment
properties in the UK which are included in the financial statements at a value of £13.2 million. The interest cost of the bank loan is 2.35 per
cent above LIBOR.
The Bisichi South African bank loans and overdrafts of £1.328 million (2016: £3.424 million) are secured by way of a first charge over specific
pieces of mining equipment, inventory and the debtors of the relevant company which holds the loan which are included in the financial
statements at a value of £6.1 million.
The bank loan of £1.25 million (Dragon) which is repayable in November 2020 is secured by way of a first charge on specific freehold
property and which is included in the financial statements at a value of £2.58 million. The interest cost of the loan is 2 per cent above LIBOR.
The Group's objectives when managing capital are:
– To safeguard the Group's ability to continue as a going concern, so that it may provide returns for shareholders and benefits for other
stakeholders; and
– To provide adequate returns to shareholders by ensuring returns are commensurate with the risk.
Analysis of the changes in liabilities arising from financing activities:
Balance at 1 January
Exchange adjustments
Cash movements excluding exchange adjustments
Valuation movements
Balance at 31 December
2017
£'000
BORROWINGS
68,509
(4)
(2,820)
264
65,949
2017
£'000
FINANCE
LEASES
4,767
–
–
(1,534)
3,233
2016
£'000
BORROWINGS
67,218
854
173
264
68,509
2016
£'000
FINANCE
LEASES
4,784
–
–
(17)
4,767
52 London & Associated Properties PLC 2017
FINANCIAL STATEMENTS Notes to the financial statements
22. PROVISIONS
At 1 January
Exchange adjustment
Unwinding of discount
At 31 December
The above provision relates to mine rehabilitation costs in Bisichi.
23. FINANCIAL INSTRUMENTS
Total financial assets and liabilities
The Group's financial assets and liabilities and their fair values are as follows:
2017
£'000
1,236
21
92
1,349
2016
£'000
847
311
78
1,236
Cash and cash equivalents
Assets held for sale
Investments held to maturity
Loan to joint venture
Other investments
Investments held for trading
Available for sale investments
Derivative assets
Other assets
Derivative liabilities
Bank overdrafts
Bank loans
Present value of head leases on properties
Other liabilities
Total financial liabilities before debentures
Fair value of debenture stocks
Fair value of the Group's debenture liabilities:
Debenture stocks
Tax at 19.25 per cent (2016: 20 per cent)
Post tax fair value adjustment
Post tax fair value adjustment – basic pence per share
FAIR
VALUE
£'000
7,528
36,441
1,748
–
51
19
1,050
1
5,656
(435)
(1,262)
(52,218)
(3,233)
(6,779)
(11,433)
BOOK
VALUE
£'000
(13,000)
–
–
–
2017
2016
CARRYING
VALUE
£'000
7,528
36,441
1,748
–
51
19
1,050
1
5,656
(435)
(1,262)
(51,765)
(3,233)
(6,779)
(10,980)
FAIR
VALUE
£'000
6,265
–
1,874
1,350
32
19
781
4
5,711
(793)
(3,334)
(52,218)
(4,767)
(6,432)
(51,508)
CARRYING
VALUE
£'000
6,265
–
1,874
1,350
32
19
781
4
5,711
(793)
(3,334)
(51,520)
(4,767)
(6,432)
(50,810)
FAIR
VALUE
£'000
(15,686)
–
–
–
2017
FAIR VALUE
ADJUSTMENT
£'000
(2,686)
517
(2,169)
(2.54)p
2016
FAIR VALUE
ADJUSTMENT
£'000
(3,526)
705
(2,821)
(3.3)p
There is no material difference in respect of other financial liabilities or any financial assets.
The fair values were calculated by the directors as at 31 December 2017 and reflect the replacement value of the financial instruments used
to manage the Group's exposure to adverse rate movements.
The fair values of the debentures are based on the net present value at the relevant gilt interest rate of the future payments of interest on the
debentures. The bank loans and overdrafts are at variable rates and there is no material difference between book values and fair values.
Investments held for trading and available for sale fall under level 1 of the fair value hierarchy into which fair value measurements are
recognised in accordance with the levels set out in IFRS 7. Held to maturity investments are held at cost and other investments are held at
fair value. The directors are of the opinion that the difference in value between cost and fair value of other investments is not significant or
material. The comparative figures for 2016 fall under the same category of financial instrument as 2017.
The carrying amount of short term (less than 12 months) trade receivable and other liabilities approximates its fair values. The fair value of
non-current borrowings in Note 21 approximates its carrying value and was determined under level 2 of the fair value hierarchy and is
estimated by discounting the future contractual cash flows at the current market interest rates for UK borrowings and for the South African
overdraft facility. The fair value of the finance lease liabilities in Note 31 approximates its carrying value and was determined under level 2 of
the fair value hierarchy and is estimated by discounting the future contractual cash flows at the current market interest rates.
London & Associated Properties PLC 2017 53
FINANCIAL STATEMENTS Notes to the financial statements
23. FINANCIAL INSTRUMENTS CONTINUED
Treasury policy
The Group enters into derivative transactions such as interest rate
swaps and forward exchange contracts in order to help manage the
financial risks arising from the Group's activities. The main risks
arising from the Group's financing structure are interest rate risk,
liquidity risk and market price risk, credit risk, commodity price risk
and foreign exchange risk. The policies for managing each of these
risks and the principal effects of these policies on the results are
summarised below.
Sensitivity analysis
LAP and Dragon have variable interest term debts which are covered
by derivatives. Additionally, LAP has variable interest term debt
covered by interest caps. At 31 December 2017, with other variables
unchanged, a 1% increase in interest rates would change the profit/
loss for the year by £175,000 (2016: £173,000). Bisichi has variable
loans and a 1% increase in interest rates would change the profit/
loss for the year by £82,000 (2016: £56,000).
The Bisichi South African bank loans are secured by way of a first
charge over specific pieces of mining equipment, inventory and the
debtors of the relevant company which holds the loan. The rates of
interest vary based on PRIME in South Africa.
The £1.25 million bank loan (Dragon) is secured by way of a first
charge on specific freehold property. The rate of interest varies
based on LIBOR in the UK.
Liquidity risk
The Group's policy is to minimise refinancing risk by balancing its
exposure to interest risk and to refinancing risk. In effect the Group
seeks to borrow for as long as possible at the lowest acceptable cost.
Efficient treasury management and strict credit control minimise the
costs and risks associated with this policy which ensures that funds
are available to meet commitments as they fall due. Cash and cash
equivalents earn interest at rates based on LIBOR in the UK. These
facilities are considered adequate to meet the Group's anticipated
cash flow requirements for the foreseeable future.
Interest rate risk
Treasury activities take place under procedures and policies approved
and monitored by the Board to minimise the financial risk faced by
the Group. The £34.897 million bank loan and Bisichi United
Kingdom bank loans and overdraft are secured by way of a first
charge on certain fixed assets. The rates of interest vary based on
LIBOR in the UK.
In South Africa, an increased structured trade finance facility for
R100million was signed by Black Wattle Colliery (Pty) Limited in July
2017 with Absa Bank Limited. The facility is renewable annually at
30 June and is secured against inventory, debtors and cash that are
held by Black Wattle Colliery (Pty) Limited. The trade facility, which is
repayable on demand, is included in cash and cash equivalents within
the cashflow statement.
The £10.105 million term bank loan is secured by way of a second
charge on certain fixed assets. This loan is based on a fixed interest
rate.
The table below analyses the Group's financial liabilities (excluding interest rate derivatives) into maturity Groupings and also provides details
of the liabilities that bear interest at fixed, floating and non–interest bearing rates.
Bank overdrafts (floating)
Debentures (fixed)
Bank loans (fixed)
Bank loans (floating)*
Trade and other payables (non–interest)
Bank overdrafts (floating)
Debentures (fixed)
Bank loans (fixed)
Bank loans (floating)*
Trade and other payables (non–interest)
2017
TOTAL
£'000
1,262
12,922
10,009
41,756
6,779
72,728
2016
TOTAL
£'000
3,334
13,655
9,945
41,575
6,432
74,941
LESS THAN
1 YEAR
£'000
1,262
3,000
–
26
6,779
11,067
LESS THAN
1 YEAR
£'000
3,334
750
–
24
6,432
10,540
2-5 YEARS
£'000
–
9,922
10,009
41,730
–
61,661
2-5 YEARS
£'000
–
3,000
9,945
41,551
–
54,496
OVER
5 YEARS
£'000
–
–
–
–
–
–
OVER
5 YEARS
£'000
–
9,905
–
–
–
9,905
The Group would normally expect that sufficient cash is generated in the operating cycle to meet the contractual cash flows as disclosed
above through effective cash management.
*Certain bank loans are fully hedged with appropriate interest derivatives. Details of all hedges are shown below.
54 London & Associated Properties PLC 2017
FINANCIAL STATEMENTS Notes to the financial statements
23. FINANCIAL INSTRUMENTS CONTINUED
Market price risk
The Group is exposed to market price risk through interest rate and
currency fluctuations.
Credit risk
At the balance sheet date there were no significant concentrations of
credit risk. The maximum exposure to credit risk is represented by
the carrying amount of each financial asset in the balance sheet. The
Group only deposits surplus cash with well–established financial
institutions of high quality credit standing.
Foreign exchange risk
Only Bisichi is subject to this risk. All trading is undertaken in the
local currencies except for certain export sales which are invoiced in
US Dollars. It is not the Bisichi Group's policy to obtain forward
contracts to mitigate foreign exchange risk on these contracts as
payment terms are within 15 days of invoice or earlier. Funding is
also in local currencies other than inter-company investments and
loans and it is also not the Bisichi Group's policy to obtain forward
contracts to mitigate foreign exchange risk on these amounts. During
2017 and 2016 the Bisichi Group did not hedge its exposure of
foreign investments held in foreign currencies.
The Bisichi directors consider there to be no significant risk from
exchange rate movements of foreign currencies against the
functional currencies of the reporting companies within the Bisichi
Group, excluding inter-company balances. The principal currency risk
to which the Bisichi Group is exposed in regard to inter-company
balances is the exchange rate between Pounds Sterling and South
African Rand. It arises as a result of the retranslation of Rand
denominated inter-company trade receivable balances held within
the UK which are payable by South African Rand functional currency
subsidiaries.
Based on the Bisichi Group's net financial assets and liabilities as at
31 December 2017, a 25% strengthening of Sterling against the
South African Rand, with all other variables held constant, would
decrease the Bisichi Group's profit after taxation by £34,000 (2016:
£435,000). A 25% weakening of Sterling against the South African
Rand, with all other variables held constant would increase the
Bisichi Group's profit after taxation by £56,000 (2016: £725,000).
The 25% sensitivity has been determined based on the average
historic volatility of the exchange rate for 2016 and 2017.
The table below shows the Bisichi currency profiles of cash and cash equivalents:
Sterling
South African Rand
US Dollar
Cash and cash equivalents earn interest at rates based on LIBOR in Sterling and Prime in Rand.
The tables below shows the Bisichi currency profiles of net monetary assets and liabilities by functional currency:
2017:
Sterling
South African Rand
US Dollar
2016:
Sterling
South African Rand
US Dollar
2017
£'000
3,402
1,923
2
5,327
2016
£'000
1,717
725
2
2,444
UK
£'000
(832)
54
13
(765)
SOUTH AFRICA
£'000
–
(1,304)
–
(1,304)
UK
£'000
(2,522)
36
35
(2,451)
SOUTH AFRICA
£'000
–
(2,262)
–
(2,262)
Borrowing facilities
At 31 December 2017 the Group was within its bank borrowing facilities and was not in breach of any of the covenants. Term loan
repayments are as set out on next page. Details of other financial liabilities are shown in Notes 20 and 21.
London & Associated Properties PLC 2017 55
FINANCIAL STATEMENTS Notes to the financial statements
23. FINANCIAL INSTRUMENTS CONTINUED
Interest rate and hedge profile
Fixed rate borrowings
Floating rate borrowings
– Subject to interest rate swap
– Other borrowings
Average fixed interest rate
Weighted average swapped interest rate
Weighted average cost of debt on overdrafts, bank loans and debentures
Average period for which borrowing rate is fixed
Average period for which borrowing rate is swapped
2017
£'000
23,105
36,147
7,160
66,412
9.17%
3.32%
5.45%
2.9 years
1.5 years
2016
£'000
23,855
36,147
9,300
69,302
9.24%
3.30%
5.80%
3.8 years
2.5 years
The Group's floating rate debt bears interest based on LIBOR for the term bank loans and bank base rate for the overdraft.
At 31 December 2017 the Group had hedges totalling £34.897 million to cover the £34.9 million bank loan. These consisted of a 5 year
swap for £17.5 million, at 2.25% and a £17.397 million cap agreement at 2.25% to July 2019.
At the year end the fair value liability in the accounts was £435,000 (2016: £793,000) as valued by the hedge provider.
At 31 December 2017, Dragon had hedges of £1.25 million to cover the £1.25 million bank loan. This consists of a 5 year £1.25 million cap
agreement taken out in November 2016 at 2.5%. At the year end, the fair value asset in the accounts was £1,000 (2016: £4,000), as valued
by the hedge provider.
Fair value of financial instruments
Fair value estimation
The Group has adopted the amendment to IFRS 7 for financial instruments that are measured in the balance sheet at fair value. This requires
the methods of fair value measurement to be classified into a hierarchy based on the reliability of the information used to determine the
valuation, as follows:
– Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
– Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices)
or indirectly (that is, derived from prices) (level 2).
– Inputs for the asset or liability that are not based on observable market data (that is unobservable inputs) (level 3).
LEVEL 1
£'000
LEVEL 2
£'000
LEVEL 3
£'000
TOTAL
£'000
2017
GAIN/(LOSS)
TO INCOME
STATEMENT
£'000
1,069
–
–
–
1
435
–
–
–
1,069
1
-
(3)
435
358
LEVEL 1
£'000
LEVEL 2
£'000
LEVEL 3
£'000
TOTAL
£'000
2016
GAIN/(LOSS)
TO INCOME
STATEMENT
£'000
832
–
–
–
4
793
–
–
–
832
4
13
(11)
793
(206)
Financial assets
Other financial assets held for trading and available for sale
Quoted equities
Derivative financial instruments
Interest rate swaps
Financial liabilities
Derivative financial instruments
Interest rate swaps
Financial assets
Other financial assets held for trading and available for sale
Quoted equities
Derivative financial instruments
Interest rate swaps
Financial liabilities
Derivative financial instruments
Interest rate swaps
56 London & Associated Properties PLC 2017
FINANCIAL STATEMENTS Notes to the financial statements
23. FINANCIAL INSTRUMENTS CONTINUED
Capital structure
The Group sets the amount of capital in proportion to risk. It ensures that the capital structure is commensurate to the economic conditions
and risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may vary the amount of
dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Group considers its capital to include share capital, share premium, capital redemption reserve, translation reserve and retained earnings,
but excluding the interest rate derivatives.
Consistent with others in the industry, the Group monitors its capital by its debt to equity ratio (gearing levels). This is calculated as the net
debt (loans less cash and cash equivalents) as a percentage of the equity calculated as follows:
Total debt
Less cash and cash equivalents
Net debt
Total equity
2017
£'000
65,949
(7,528)
58,421
56,710
103.0%
2016
£'000
68,509
(6,265)
62,244
48,631
128.0%
The Group does not have any externally imposed capital requirements.
Financial assets
The Group's principal financial assets are bank balances and cash, trade and other receivables, investments and assets held for sale. The Group has
no significant concentration of credit risk as exposure is spread over a large number of counterparties and customers. The credit risk in liquid funds
and derivative financial instruments is limited because the counterparties are banks with high credit ratings assigned by international credit–rating
agencies. The Group's credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheet are net of allowances
for doubtful receivables, estimated by the Group's management based on prior experience and the current economic environment.
Financial assets maturity
Cash and cash equivalents all have a maturity of less than three months.
Cash at bank and in hand
2017
£'000
7,528
2016
£'000
6,265
These funds are primarily invested in short term bank deposits maturing within one year bearing interest at the bank's variable rates.
Financial liabilities maturity
The following table sets out the maturity profile of contractual undiscounted cashflows of financial liabilities as at 31 December:
Repayment of borrowings
Bank loans and overdrafts:
Repayable on demand or within one year
Repayable between two and five years
Debentures:
Repayable within one year
Repayable between two and five years
Repayable in more than five years
2017
£'000
2016
£'000
1,288
51,739
53,027
3,000
9,922
–
65,949
3,358
51,496
54,854
750
3,000
9,905
68,509
Certain borrowing agreements contain financial and other conditions that if contravened by the Group, could alter the repayment profile.
Bank loans of £15.9 million currently shown as repayable between two and five years related to Brixton markets sales are repayable on completion.
24. DEFERRED TAX ASSET
Balance at 1 January
Transferred to consolidated income statement
Balance at 31 December
The deferred tax balance comprises the following:
Revaluation of properties
Accelerated capital allowances
Fair value of interest derivatives
Short-term timing differences
Loss relief
Deferred tax asset at end of year:
2017
£'000
1,134
(1,134)
–
–
–
–
–
–
–
2016
£'000
2,390
(1,256)
1,134
(2,719)
(904)
151
(124)
4,730
1,134
London & Associated Properties PLC 2017 57
FINANCIAL STATEMENTS Notes to the financial statements
25. DEFERRED TAX LIABILITIES
Balance at 1 January
Transferred from/(to) consolidated income statement
Transferred from other comprehensive income
Exchange adjustment
Balance at 31 December
The deferred tax balance comprises the following:
Revaluation of properties
Accelerated capital allowances
Short-term timing differences
Unredeemed capital deductions
Losses and other deductions
Deferred tax liability provision at end of year:
2017
£'000
2,329
1,484
–
35
3,848
5,836
2,522
144
(83)
(4,571)
3,848
2016
£'000
2,106
(154)
13
364
2,329
793
1,347
191
(642)
640
2,329
The directors consider the temporary differences arising in connection with the interests in joint ventures are insignificant. There is no time
limit in respect of the Group tax loss relief.
In addition, the Group has unused losses and reliefs with a potential value of £5,427,000 (2016: £5,455,000), which have not been
recognised as a deferred tax asset. As the Group returns to profit, these losses and reliefs can be utilised.
26. SHARE CAPITAL
The Company has one class of ordinary shares which carry no right to fixed income.
Authorised: ordinary shares of 10p each
Allotted, issued and fully paid share capital
Less: held in Treasury (see below)
“Issued share capital” for reporting purposes
Treasury shares
Shares held in Treasury at 1 January
Issued for share incentive plan -dividends investment (Jan 2016 - 25p)
Issued to meet directors bonuses (Jan 2016 - 24.50p)
Issued to meet staff bonuses (Jan 2016 - 24.50p)
Issued for new directors share incentive plan (Jan 2016 - 24.50p)
Issued for new staff share incentive plan (Jan 2016 - 24.50p)
Issued for share incentive plan -dividends investment (Nov 2016 - 21.25p)
Issued to meet directors bonuses (Nov 2016 - 21.25p)
Shares held in Treasury at 31 December
Share Option Schemes
NUMBER OF
ORDINARY 10P
SHARES
2017
110,000,000
85,542,711
(221,061)
85,321,650
NUMBER OF
ORDINARY 10P
SHARES
2016
110,000,000
85,542,711
(221,061)
85,321,650
2017
£'000
11,000
8,554
(22)
8,532
2016
£'000
11,000
8,554
(22)
8,532
NUMBER OF
ORDINARY
10P SHARES
COST/ISSUE VALUE
2017
221,061
–
–
–
–
–
–
–
221,061
2016
734,816
(1,936)
(69,225)
(154,073)
(24,488)
(36,732)
(2,831)
(224,470)
221,061
2017
£'000
145
–
–
–
–
–
–
–
145
2016
£'000
482
(1)
(45)
(101)
(16)
(24)
(2)
(148)
145
Employees' share option scheme (Approved scheme)
At 31 December 2017 there were no options to subscribe for ordinary shares outstanding, issued under the terms of the Employees' Share
Option Scheme.
This share option scheme was approved by members in 1986, and has been approved by Her Majesty's Revenue and Customs (HMRC).
There are no performance criteria for the exercise of options under the Approved scheme, as this was set up before such requirements were
considered to be necessary.
A summary of the shares allocated and options issued under the scheme up to 31 December 2017 is as follows:
AT 1
JANUARY
2017
Shares issued to date
2,367,604
1,549,955
Shares allocated over which options have not been granted
Total shares allocated for issue to employees under the scheme 3,917,559
OPTIONS
EXERCISED
–
–
–
OPTIONS
GRANTED
–
–
–
OPTIONS
LAPSED
–
–
–
AT 31
DECEMBER
2017
2,367,604
1,549,955
3,917,559
CHANGES DURING THE YEAR
58 London & Associated Properties PLC 2017
FINANCIAL STATEMENTS Notes to the financial statements
26. SHARE CAPITAL CONTINUED
Non–approved Executive Share Option Scheme (Unapproved scheme)
A share option scheme known as the “Non–approved Executive Share Option Scheme” which does not have HMRC approval was set up
during 2000. At 31 December 2017 there were no options to subscribe for ordinary shares outstanding.
The exercise of options under the Unapproved scheme is subject to the satisfaction of objective performance conditions specified by the
remuneration committee which confirms to institutional shareholder guidelines and best practice provisions.
A summary of the shares allocated and options issued under the scheme up to 31 December 2017 is as follows:
AT 1
JANUARY
2017
450,000
Shares issued to date
Shares allocated over which options have not yet been granted
550,000
Total shares allocated for issue to employees under the scheme 1,000,000
OPTIONS
EXERCISED
–
–
–
OPTIONS
GRANTED
–
–
–
OPTIONS
LAPSED
–
–
–
AT 31
DECEMBER
2017
450,000
550,000
1,000,000
CHANGES DURING THE YEAR
The Bisichi Mining PLC Unapproved Option Schemes
Details of the share option schemes in Bisichi are as follows:
YEAR OF GRANT
2010
2015
SUBSCRIPTION
PRICE PER SHARE
PERIOD WITHIN
WHICH OPTIONS
EXERCISABLE
202.5p Aug 2013 – Aug 2020
87.0p Sep 2015 – Sep 2025
NUMBER OF SHARES
FOR WHICH OPTIONS
OUTSTANDING AT
31 DECEMBER 2016
80,000
300,000
NUMBER OF
SHARE OPTIONS
ISSUED/EXERCISED/
(CANCELLED)
DURING YEAR
–
–
NUMBER OF SHARES
FOR WHICH OPTIONS
OUTSTANDING AT
31 DECEMBER 2017
80,000
300,000
The exercise of options under the Unapproved Share Option Schemes, for certain option issues, is subject to the satisfaction of the objective
performance conditions specified by the remuneration committee, which will conform to institutional shareholder guidelines and best
practice provisions in force from time to time.
On the 5 February 2018 Bisichi entered into an agreement with G.Casey to surrender the 80,000 options which were granted in 2010. The
aggregate consideration paid by the Group to effect the cancellation was £1. There are no performance or service conditions attached to
2015 options which are outstanding at 31 December 2017 which vested in 2015.
On 6 February 2018 Bisichi granted additional options to the following directors:
• A.Heller 150,000 options at an exercise price of 73.50p per share.
• G.Casey 230,000 options at an exercise price of 73.50p per share.
The above options vest on date of grant and are exercisable within a period of 10 years from date of grant. There are no performance or
service conditions attached to the options.
Outstanding at 1 January
Lapsed during the year
Outstanding at 31 December
Exercisable at 31 December
27. NON–CONTROLLING INTEREST (“NCI”)
As at 1 January
Share of profit for the year
Share of gain on available for sale investments
Dividends received
Shares issued
Exchange movement
As at 31 December
The following subsidiaries had material NCI:
Bisichi Mining PLC
Black Wattle Colliery (Pty) Ltd
2017
WEIGHTED
AVERAGE
EXERCISE PRICE
111.3p
–
111.3p
111.3p
2017
NUMBER
380,000
–
380,000
380,000
2016
WEIGHTED
AVERAGE
EXERCISE PRICE
133.1p
237.5p
111.3p
111.3p
2016
NUMBER
705,000
(325,000)
380,000
380,000
2017
£'000
10,389
610
49
(250)
–
58
10,856
2016
£'000
9,574
208
104
(250)
64
689
10,389
London & Associated Properties PLC 2017 59
FINANCIAL STATEMENTS Notes to the financial statements
27. NON–CONTROLLING INTEREST (“NCI”) CONTINUED
Summarised financial information for these subsidiaries is set out below. The information is before inter–company eliminations with other
companies in the Group.
BISICHI MINING PLC
Revenue
Profit for the year attributable to owners of the parent
Profit/(loss) for the year attributable to NCI
Profit for the year
Other comprehensive income attributable to owners of the parent
Other comprehensive income attributable to NCI
Other comprehensive income for the year
Balance sheet
Non–current assets
Current assets
Total assets
Current liabilities
Non–current liabilities
Total liabilities
Net current assets at 31 December
Cash flows
From operating activities
From investing activities
From financing activities
Net cash flows
2017
£'000
37,446
749
172
921
163
11
174
22,935
13,622
36,557
(9,025)
(9,858)
(18,883)
17,674
7,692
(1,812)
(975)
4,905
2016
£'000
22,791
479
(72)
407
1,186
100
1,286
24,649
12,224
36,873
(10,326)
(9,541)
(19,867)
17,006
2,941
(1,570)
(969)
402
The non–controlling interest comprises of a 37.5% shareholding in Black Wattle Colliery (Pty) Ltd, a coal mining company incorporated in
South Africa.
Summarised financial information reflecting 100% of the underlying subsidiary's relevant figures, is set out below.
BLACK WATTLE COLLIERY (PTY) LIMITED (“BLACK WATTLE”)
Revenue
Expenses
Profit/(loss) for the year
Total comprehensive income/(expense) for the year
Balance sheet
Non–current assets
Current assets
Current liabilities
Non–current liabilities
Net assets at 31 December
2017
£'000
36,300
(35,150)
1,150
1,150
8,613
6,747
(8,652)
(3,155)
3,553
2016
£'000
21,703
(22,185)
(482)
(482)
8,516
8,600
(12,151)
(2,635)
2,330
The non–controlling interest relates to the disposal of a 37.5% shareholding in Black Wattle in 2010. The total issued share capital in Black
Wattle Colliery (Pty) Ltd was increased from 136 shares to 1,000 shares at par of ZAR1 (South African Rand) through the following shares issue:
– a subscription for 489 ordinary shares at par by Bisichi Mining (Exploration) Limited increasing the number of shares held from 136
ordinary shares to a total of 625 ordinary shares;
– a subscription for 110 ordinary shares at par by Vunani Mining (Pty) Ltd;
– a subscription for 265 “A” shares at par by Vunani Mining (Pty) Ltd
Bisichi Mining (Exploration) Limited is a wholly owned subsidiary of Bisichi Mining PLC incorporated in England and Wales.
Vunani Mining (Pty) Ltd is a South African Black Economic Empowerment company and minority shareholder in Black Wattle.
The “A” shares rank pari passu with the ordinary shares save that they will have no dividend rights until such time as the dividends paid by
Black Wattle Colliery (Pty) Ltd on the ordinary shares subsequent to 30 October 2008 will equate to ZAR832,075,000.
A non–controlling interest of 15% in Black Wattle is recognised for all profits distributable to the 110 ordinary shares held by Vunani Mining
(Pty) Ltd from the date of issue of the shares (18 October 2010). An additional non–controlling interest will be recognised for all profits
distributable to the 265 “A” shares held by Vunani Mining (Pty) Ltd after such time as the profits available for distribution, in Black Wattle
Colliery (Pty) Ltd, before any payment of dividends after 30 October 2008, exceeds ZAR832,075,000.
60 London & Associated Properties PLC 2017
FINANCIAL STATEMENTS Notes to the financial statements
28. RELATED PARTY TRANSACTIONS
Related party:
Dragon Retail Properties Limited
Current account
Loan account
Bisichi Mining PLC
Current account
Simon Heller Charitable Trust
Current account
Loan account
Directors and key management
M A Heller and J A Heller
H D Goldring (Delmore Holdings Limited)
C A Parritt
R Priest
Ezimbokodweni Mining (pty) Limited - see Note 12
Totals at 31 December 2017
Totals at 31 December 2016
COST RE-
CHARGED
TO (BY)
RELATED
PARTY
£'000
AMOUNTS
OWED
BY (TO)
RELATED
PARTY
£'000
ADVANCED TO
(BY) RELATED
PARTY
£'000
–
(1)
–
(63)
–
15
(15)
(18)
(35)
46
(71)
53
24
–
–
–
(700)
1
–
(4)
–
–
(679)
340
(84)
–
–
–
–
–
–
–
–
–
(84)
(208)
(i)
(ii)
(ii)
(ii)
Nature of costs recharged – (i) Property management fees (ii) Consultancy fees.
Directors
London & Associated Properties PLC provides office premises, property management, general management, accounting and administration
services for a number of private property companies in which Sir Michael Heller and J A Heller have an interest. Under an agreement with Sir
Michael Heller no charge is made for these services on the basis that he reduces by an equivalent amount the charge for his services to
London & Associated Properties PLC. The board estimates that the value of these services, if supplied to a third party, would have been
£300,000 for the year (2016: £300,000).
The companies for which services are provided are: Barmik Properties Limited, Cawgate Limited, Clerewell Limited, Cloathgate Limited,
Ken–Crav Investments Limited, London & South Yorkshire Securities Limited, Metroc Limited, Penrith Retail Limited, Shop.com Limited, South
Yorkshire Property Trust Limited, Wasdon Investments Limited, Wasdon (Dover) Limited, and Wasdon (Leeds) Limited.
In addition the Company receives management fees of £10,000 (2016: £10,000) for work done for two charitable foundations, the Michael
& Morven Heller Charitable Foundation and the Simon Heller Charitable Trust.
The Simon Heller Trust has placed on deposit with LAP £700,000 at an interest rate of 9% which is refundable on demand.
Delmore Holdings Limited (Delmore) is a Company in which H D Goldring is a majority shareholder and director. Delmore provides
consultancy services to the Company on an invoiced fee basis.
R Priest provided consultancy services to the Company on an invoiced fee basis.
In 2012 a loan of £116,000 was made by Bisichi to one of the Bisichi directors - A R Heller. The loan amount outstanding at the year end was
£56,000 (2016: £71,000) and a repayment of £15,000 (2016: £15,000) was made during the year. Interest is payable on the loan at a rate of
6.14 percent. There is no fixed repayment date for the loan.
The directors are considered to be the only key management personnel and their remuneration including employer's national insurance for
the year were £949,000 (2016: £1,103,000). All other disclosures required including interest in share options in respect of those directors are
included within the remuneration report.
29. EMPLOYEES
The average number of employees, including directors, of the Group during the year was as follows:
Production
Administration
Staff costs during the year were as follows:
Salaries and other costs
Social security costs
Pension costs
Share based payments
2017
192
45
237
2017
£'000
7,426
327
360
-
8,113
2016
185
46
231
2016
£'000
6,397
332
335
109
7,173
London & Associated Properties PLC 2017 61
FINANCIAL STATEMENTS Notes to the financial statements
30. CAPITAL COMMITMENTS
Commitments for capital expenditure approved and contracted for at the year end
Share of commitment of capital expenditure in joint venture
All the above relates to Bisichi Mining PLC.
31. OPERATING AND FINANCE LEASES
2017
£'000
–
–
2016
£'000
762
1,489
Operating leases on land and buildings
At 31 December 2017 the Group had commitments under non–cancellable operating leases on land and buildings expiring as follows:
Within one year
Second to fifth year
After five years
Operating lease payments represent rentals payable by the Group for its office premises.
The leases are for an average term of ten years and rentals are fixed for an average of five years.
Present value of head leases on properties
2017
£'000
240
960
240
2016
£'000
240
960
480
Within one year
Second to fifth year
After five years
Future finance charges on finance leases
Present value of finance lease liabilities
MINIMUM LEASE
PAYMENTS
PRSENT VALUE
OF MINIMUM
LEASE PAYMENTS
2017
£'000
211
841
16,682
17,734
(14,501)
3,233
2016
£'000
305
1,222
29,734
31,261
(26,494)
4,767
2017
£'000
211
776
2,246
3,233
–
3,233
2016
£'000
305
1,130
3,332
4,767
–
4,767
Finance lease liabilities are in respect of leased investment property. Many leases provide for contingent rent in addition to the rents above,
usually a proportion of rental income.
Finance lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.
Future aggregate minimum rentals receivable
The Group leases out its investment properties to tenants under operating leases. The future aggregate minimum rentals receivable under
non–cancellable operating leases are as follows:
Within one year
Second to fifth year
After five years
2017
£'000
5,088
14,597
18,519
38,204
2016
£'000
6,684
20,104
36,736
63,524
32. CONTINGENT LIABILITIES AND EVENTS AFTER THE REPORTING PERIOD
There were no contingent liabilities at 31 December 2017 (2016: £Nil), except as disclosed in Note 23.
Bank guarantees have been issued by the bankers of Black Wattle Colliery (Pty) Limited on behalf of the Company to third parties. The
guarantees are secured against the assets of the Company and have been issued in respect of the following:
Rail siding & transportation
Rehabilitation of mining land
Water & electricity
2017
£'000
64
1,387
58
1,509
2016
£'000
63
1,364
57
1,484
In March 2018 contracts were exchanged for the sale of both Brixton markets for a combined sale price of £37.25 million. Following the
Market Row completion on 23 April 2018, £15.9 million of bank loans related to those properties have been repaid. The Brixton Village
completion was on 26 April 2018. As required under IFRS, these properties have been reclassified from Investment properties to Assets held
for sale at their net disposal value of £36.44 million.
62 London & Associated Properties PLC 2017
FINANCIAL STATEMENTS Notes to the financial statements
33. COMPANY FINANCIAL STATEMENTS
Company balance sheet at 31 December 2017
Fixed assets
Tangible assets
Other investments:
Associated company – Bisichi Mining PLC
Subsidiaries and others including Dragon Retail Properties Limited
Current assets
Debtors
Deferred tax due after more than one year
Investments
Bank balances
Creditors
Amounts falling due within one year
Borrowings
Net current liabilities
Total assets less current liabilities
Creditors
Amounts falling due after more than one year
Net assets
Capital and reserves
Share capital
Share premium account
Capital redemption reserve
Treasury shares
Retained earnings
Shareholders' funds
NOTES
33.3
33.4
33.4
33.5
33.9
33.6
33.7
33.8
33.8
33.10
33.10
2017
£'000
2016
£'000
25,397
27,383
489
42,598
43,087
68,484
1,025
2,059
19
1,233
4,336
(35,540)
(3,000)
(34,204)
34,280
489
42,492
42,981
70,364
1,130
2,082
19
2,625
5,856
(34,790)
(750)
(29,684)
40,680
(13,003)
21,277
(17,491)
23,189
8,554
4,866
47
(145)
7,955
21,277
8,554
4,866
47
(145)
9,867
23,189
The loss for the financial year, before dividends was £1,771,000 (2016: profit of £1,418,000)
These financial statements were approved by the board of directors and authorised for issue on 27 April 2018 and signed on its behalf by:
Sir Michael Heller
Director
Anil Thapar
Director
Company Registration No. 341829
London & Associated Properties PLC 2017 63
FINANCIAL STATEMENTS Notes to the financial statements
33. COMPANY FINANCIAL STATEMENTS CONTINUED
Company statement of changes in equity for the year ended 31 december 2017
Balance at 1 January 2016
Profit for the year
Total comprehensive income
Transactions with owners:
Dividends – equity holders
Disposal of own shares
Loss on transfer of own shares
Transactions with owners
Balance at 31 December 2016
Loss for the year
Total comprehensive expense
Transaction with owners:
Dividends – equity holders
Transactions with owners
Balance at 31 December 2017
SHARE
CAPITAL
£'000
8,554
–
–
–
–
–
–
8,554
–
–
–
–
8,554
SHARE
PREMIUM
£'000
4,866
–
–
CAPITAL
REDEMPTION
RESERVE
£'000
47
–
–
TREASURY
SHARES
£'000
(482)
–
–
–
–
–
–
4,866
–
–
–
–
4,866
–
–
–
–
47
–
–
–
–
47
–
119
218
337
(145)
–
–
–
–
(145)
RETAINED
EARNINGS
EXCLUDING
TREASURY
SHARES
£'000
8,803
1,418
1,418
(136)
–
(218)
(354)
9,867
(1,771)
(1,771)
(141)
(141)
7,955
TOTAL
EQUITY
£'000
21,788
1,418
1,418
(136)
119
–
(17)
23,189
(1,771)
(1,771)
(141)
(141)
21,277
£6.5 million (2016: £7.9 million) of retained earnings (excluding treasury shares) is distributable.
33.1. COMPANY
Accounting policies
The following are the main accounting policies of the Company:
Basis of preparation
The financial statements have been prepared on a going concern basis and in accordance with Financial Reporting Standard 101 'Reduced
Disclosure Framework' (FRS 101) and Companies Act 2006. The financial statements are prepared under the historical cost convention as
modified to include the revaluation of freehold and leasehold properties and fair value adjustments in respect of current asset investments
and interest rate hedges.
The results of the Company are included in the consolidated financial statements. No profit or loss is presented by the Company as permitted
by Section 408 of the Companies Act 2006.
In these financial statements, the company has applied the exemptions available under FRS 101 in respect of the following disclosures:
• Cash Flow Statement and related notes;
• Comparative period reconciliations for share capital, tangible fixed assets and intangible assets;
• Disclosures in respect of transactions with wholly owned subsidiaries;
• Disclosures in respect of capital management;
• The effects of new but not yet effective IFRSs;
• Disclosures in respect of the compensation of Key Management Personnel.
As the consolidated financial statements include the equivalent disclosures, the Company has also taken the exemptions under FRS 101
available in respect of the following disclosures:
• IFRS 2 Share Based Payments in respect of Group settled share based payments;
• The disclosures required by IFRS 7 and IFRS 13 regarding financial instrument disclosures have not been provided apart from those which
are relevant for the financial instruments which are held at fair value and are not either held as part of trading portfolio or derivatives.
Key judgements and estimates
The preparation of the financial statements requires management to make assumptions and estimates that may affect the reported amounts
of assets and liabilities and the reported income and expenses, further details of which are set out below. Although management believes
that the assumptions and estimates used are reasonable, the actual results may differ from those estimates. Further details of the estimates
are contained in the Directors' Report and in the Group accounting policies.
Investments in subsidiaries, associated undertakings and joint ventures
Investments in subsidiaries, associated undertakings and joint ventures are held at cost less accumulated impairment losses.
64 London & Associated Properties PLC 2017
FINANCIAL STATEMENTS Notes to the financial statements
33.1. COMPANY CONTINUED
Fair value measurements of investment properties and investments
An assessment of the fair value of certain assets and liabilities, in particular investment properties, is required to be performed. In such
instances, fair value measurements are estimated based on the amounts for which the assets and liabilities could be exchanged between
market participants. To the extent possible, the assumptions and inputs used take into account externally verifiable inputs. However, such
information is by nature subject to uncertainty. The fair value measurement of the investment properties may be considered to be less
judgemental where external valuers have been used as is the case with the Company.
The following accounting policies are consistent with those of the Group and are disclosed on page 36 to 41 of the Group financial statements.
• Revenue
• Property operating expenses
• Employee benefits
• Financial instruments
• Investment properties
• Other assets and depreciation
• Assets held for sale
• Income taxes
• Leases
33.2. RESULT FOR THE FINANCIAL YEAR
The Company's result for the year was a loss of £1,771,000 (2016: profit of £1,418,000). In accordance with the exemption conferred by
Section 408 of the Companies Act 2006, the Company has not presented its own profit and loss account.
33.3. TANGIBLE ASSETS
Cost or valuation at 1 January 2017
Additions
(Decrease)/increase in present value of head leases
(Decrease)/increase on revaluation
Cost or valuation at 31 December 2017
Representing assets stated at:
Valuation
Cost
Depreciation at 1 January 2017
Charge for the year
Depreciation at 31 December 2017
Net book value at 1 January 2017
Net book value at 31 December 2017
INVESTMENT PROPERTIES
FREEHOLD
£'000
8,885
–
–
410
9,295
LEASEHOLD
OVER 50 YEARS
£'000
16,744
–
(1,810)
(895)
14,039
LEASEHOLD
UNDER 50
YEARS
£'000
1,642
–
305
–
1,947
OFFICE
EQUIPMENT
AND MOTOR
VEHICLES
£'000
347
17
–
–
364
9,295
–
9,295
–
–
–
8,885
9,295
14,039
–
14,039
–
–
–
16,744
14,039
1,947
–
1,947
–
–
–
1,642
1,947
–
364
364
235
13
248
112
116
TOTAL
£'000
27,618
17
(1,505)
(485)
25,645
25,281
364
25,645
235
13
248
27,383
25,397
The freehold and leasehold properties, excluding the present value of head leases and directors' valuations, were valued as at 31 December 2017 by
professional firms of chartered surveyors. The valuations were made at fair value. The directors' property valuations were made at fair value.
Allsop LLP
Directors' valuation
Add: Present value of headleases
The historical cost of investment properties was as follows:
Cost at 1 January 2017
Cost at 31 December 2017
2017
£'000
20,375
1,825
22,200
3,081
25,281
2016
£'000
20,860
1,825
22,685
4,586
27,271
FREEHOLD
£'000
4,889
4,889
LEASEHOLD
OVER 50 YEARS
£'000
13,966
13,966
LEASEHOLD
UNDER 50
YEARS
£'000
1,939
1,939
Long leasehold properties are held on leases with an unexpired term of more than fifty years at the balance sheet date.
London & Associated Properties PLC 2017 65
FINANCIAL STATEMENTS Notes to the financial statements
33.4. OTHER INVESTMENTS
COST OR VALUATION
At 1 January 2017
Impairment provision
At 31 December 2017
SHARES IN
SUBSIDIARY
COMPANIES
£'000
42,328
106
42,434
SHARES IN
JOINT
VENTURES
£'000
164
–
164
TOTAL
£'000
42,981
106
43,087
£'000
489
–
489
Subsidiary companies
Details of the Company's subsidiaries are set out in Note 15. Under IFRS 10, Bisichi Mining PLC and its subsidiaries and Dragon Retail
Properties Limited are treated in the financial statements as subsidiaries of the Company.
Impairment reflects reduction in value of investment due to receipt of dividend of £15 million from a subsidiary.
In the opinion of the directors the value of the investment in subsidiaries is not less than the amount shown in these financial statements.
Details of the joint ventures are set out in Notes 12 and 13.
33.5. DEBTORS
Trade debtors
Amounts due from associate and joint ventures
Amounts due from subsidiary companies
Other debtors
Prepayments and accrued income
33.6. INVESTMENTS
Market value of the listed investment portfolio
Unrealised gain of market value over cost
Listed investment portfolio at cost
All investments are listed on the London Stock Exchange.
33.7. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Amounts owed to subsidiary companies
Amounts owed to joint ventures
Other taxation and social security costs
Other creditors
Accruals and deferred income
33.8. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Present value of head leases on properties
Term Debenture stocks:
£3.75 million First Mortgage Debenture Stock 2018 at 11.6 per cent
£10 million First Mortgage Debenture Stock 2022 at 8.109 per cent*
*The £10 million debenture is shown after deduction of un–amortised issue costs.
Details of terms and security of overdrafts, loans and loan renewal and debentures are set out in Note 21.
REPAYMENT OF BORROWINGS:
Debentures:
Repayable within one year
Repayable between two and five years
Repayable in more than five years
66 London & Associated Properties PLC 2017
2017
£'000
366
33
100
118
408
1,025
2017
£'000
19
1
18
2017
£'000
29,775
2,214
278
1,400
1,873
35,540
2017
£'000
3,081
–
9,922
9,922
13,003
2017
£'000
3,000
9,922
–
12,922
2016
£'000
343
35
150
173
429
1,130
2016
£'000
19
1
18
2016
£'000
28,750
2,190
388
1,323
2,139
34,790
2016
£'000
4,586
3,000
9,905
12,905
17,491
2016
£'000
750
3,000
9,905
13,655
FINANCIAL STATEMENTS Notes to the financial statements
33.9. DEFERRED TAX ASSET
Deferred Taxation
Balance at 1 January
Transfer to profit and loss account
Balance at 31 December
The deferred tax balance comprises the following:
Accelerated capital allowances
Short–term timing differences
Revaluation of investment properties
Loss relief
Deferred tax asset at year end
33.10. SHARE CAPITAL
Details of share capital, treasury shares and share options are set out in Note 26.
33.11. RELATED PARTY TRANSACTIONS
2017
£'000
2,082
(23)
2,059
(833)
(124)
66
2,950
2,059
2016
£'000
3,055
(973)
2,082
(823)
(124)
100
2,929
2,082
Related party:
Dragon Retail Properties Limited
Current account
Loan account
Bisichi Mining PLC
Current account
Simon Heller Charitable Trust
Current account
Loan account
Directors and key management
M A Heller and J A Heller
H D Goldring (Delmore Holdings Limited)
C A Parritt
R Priest
Totals at 31 December 2017
Totals at 31 December 2016
COST RE-
CHARGED
TO (BY) RELAT-
ED
PARTY
£'000
AMOUNTS
OWED
BY (TO) RELAT-
ED
PARTY
£'000
ADVANCED TO
(BY) RELATED
PARTY
£'000
(95)
–
138
(63)
–
15
(15)
(18)
(35)
(73)
(84)
(i)
(ii)
(i)
(iii)
(iii)
(iii)
(214)
(2,000)
33
–
(700)
1
–
(4)
–
(2,884)
(2,916)
–
–
–
–
–
–
–
–
–
–
(34)
Nature of costs recharged – (i) Management fees (ii) Property management fees (iii) Consultancy fees
During the period, the Company entered into transactions, in the ordinary course of business, with other related parties. The company has
taken advantage of the exemption under paragraph 8(k) of FRS101 not to disclose transactions with wholly owned subsidiaries.
Dragon Retail Properties Limited – ‘Dragon' is owned equally by the Company and Bisichi Mining PLC. During 2013 Dragon lent the company
£2 million at 6.875 per cent annual interest.
Bisichi Mining PLC – The company has 41.52 per cent ownership of ‘Bisichi'.
Other details of related party transactions are given in Note 28.
London & Associated Properties PLC 2017 67
FINANCIAL STATEMENTS Notes to the financial statements
33.12. EMPLOYEES
THE AVERAGE WEEKLY NUMBER OF EMPLOYEES OF THE COMPANY DURING THE YEAR WERE AS FOLLOWS:
Directors & Administration
STAFF COSTS DURING THE YEAR WERE AS FOLLOWS:
Salaries
Social Security costs
Pension costs
2017
24
2017
£'000
1,375
163
119
1,657
2016
25
2016
£'000
1,474
178
135
1,787
33.13. CAPITAL COMMITMENTS
There were no capital commitments at 31 December 2017 (2016: £Nil).
33.14. OPERATING AND FINANCE LEASES
At 31 December 2017 the Company had commitments under non–cancellable operating leases on land and buildings as follows:
Expiring in more than five years
2017
£'000
1,440
2016
£'000
1,680
In addition, the Company has an annual commitment to pay ground rents on its leasehold investment properties which amount to £201,000
(2016: £246,000).
Present value of head leases on properties
Within one year
Second to fifth year
After five years
Future finance charges on finance leases
Present value of finance lease liabilities
MINIMUM LEASE
PAYMENTS
PRESENT VALUE
OF MINIMUM
LEASE PAYMENTS
2017
£'000
201
803
15,483
16,487
(13,406)
3,081
2016
£'000
294
1,177
28,298
29,769
(25,183)
4,586
2017
£'000
201
746
2,134
3,081
–
3,081
2016
£'000
294
1,094
3,198
4,586
–
4,586
Finance lease liabilities are in respect of leased investment property. A few leases provide for contingent rent in addition to the rents above,
usually a proportion of rental income.
Finance lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.
Future aggregate minimum rentals receivable
The Company leases out its investment properties to tenants under operating leases. The future aggregate minimum rentals receivable under
non–cancellable operating leases are as follows:
Within one year
Second to fifth year
After five years
33.15. CONTINGENT LIABILITIES AND POST BALANCE SHEET EVENTS
There were no contingent liabilities at 31 December 2017 (2016: £Nil).
2017
£'000
1,758
4,178
1,934
7,870
2016
£'000
1,661
4,446
2,393
8,500
68 London & Associated Properties PLC 2017
Five year financial summary
Portfolio size
Investment properties–LAP^
Investment properties–joint ventures
Investment properties–Dragon Retail Properties
Investment properties–Bisichi Mining^
Portfolio activity
Acquisitions
Disposals
Capital Expenditure
Consolidated income statement
Group income
Profit/(loss) before tax
Taxation
Profit/(loss) attributable to shareholders
Earnings/(loss) per share – basic and diluted
Dividend per share
Consolidated balance sheet
Shareholders' funds attributable to equity shareholders
Net borrowings
Net assets per share – basic
– fully diluted
Consolidated cash flow statement
Cash generated from operations
Capital investment and financial investment
Notes:
^ Excluding the present value of head leases
2017
£M
62
–
3
13
78
£M
–
–
–
–
£M
44.98
11.28
(2.98)
7.69
9.01p
0.300p
£M
45.86
58.42
53.74p
53.74p
£M
10.29
(1.80)
2016
£M
89
–
3
13
105
£M
–
–
0.16
0.16
£M
29.70
(0.97)
(1.18)
(2.36)
(2.77)p
0.165p
£M
38.24
62.22
44.83p
44.83p
£M
5.59
(0.18)
2015
£M
89
19
3
13
124
£M
1.00
(0.40)
0.36
0.96
£M
32.67
(2.09)
0.04
(1.90)
(2.24)p
0.160p
£M
40.08
62.39
47.26p
47.26p
£M
4.37
(2.77)
2014
£M
89
20
3
12
124
£M
0.68
–
–
0.68
£M
33.53
(2.69)
(3.70)
(7.14)
(8.45)p
0.156p
£M
42.55
59.71
50.35p
50.35p
£M
2.96
100.42
2013
£M
87
16
3
12
118
£M
–
(9.47)
–
(9.47)
£M
43.29
1.14
2.55
3.47
4.12p
0.125p
£M
49.73
53.96
59.00p
59.00p
£M
12.23
4.35
London & Associated Properties PLC 2017 69
www.lap.co.uk
LONDON & ASSOCIATED PROPERTIES PLC
24 BRUTON PLACE
LONDON W1J 6NE
EMAIL: ADMIN@LAP.CO.UK